Thungen Financial 11th August 2014 - European Economic Update
Last week Mario Draghi, the head of the European Central Bank confirmed that interest rates would stay the same and that he was poised to start printing money and buy European bonds.
With the EU reporting on Economic output for the 2nd quarter of 2014 this week for 18 of its members, all eyes will be on the ECB and what reactionary responses they will announce.
The majority of markets corrected late on Friday and have opened slightly higher today as news that Moscow has started to withdraw troops from its exercise near the Ukraine border. As tensions ease, attention will turn to how sanctions will be affecting both sides of the dispute. Already there have been calls from several EU members to look to deal with the bans imposed by Russia and how they can move this situation forward.
Initially many thought that it would be Moscow that would feel the brunt of the financial sanctions and for a time the Russian markets performed terribly, however, as time progressed the local markets shored up as Russian companies started to withdraw their foreign investments and look to protect themselves from the sanctions. Now it appears that Europe is going to be the main loser in this situation. With many of the EU major corporations having large exposure to Russia companies, many will feel that the European Union should have done more than just follow the US's lead and that a more targeted approach from Europe should have been used.
Now in a week that is expected to show that the EU's economic output falling along with inflation at 0.4%, its lowest since October 2009 and well below the 2% target; Italy returning to recession and Germany's output predicted to be well below par, we could start to see some movement in the markets as investors start to see the situation for what it is.
As the US heads out of Fed Reserve asset buying, the ECB looks to head straight into it. Whether they will achieve the same results only time will tell.
Major Global Markets as of 11th August 2014
FTSE 6,618.97 +0.79% Dax 9,134.94 +1.39%
Dow 16,533.93 +1.13%
Nikkei 15,130.52 +2.38% Hang Seng 24,622.71 +1.20%
MICEX 1,333.53 -0.08%
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