26th August 2014 - European Economic Update
Major European Indexes:
FTSE 100 (22/8) 6,775.25 (-0.02%)
Dax 9,510.14 (+1.87%)
CAC 40 4,342.11 (2.10%)
IBEX 10,690.10 (+1.81%)
SMI 8,611.58 (+0.67%) MICEX 1,461.75 (+0.87%)
European markets had a bumper day yesterday as news from the ECB sparked some confidence that there could be some form of stimulus from the European Central Bank as soon as next week.
Speaking early Monday morning, Mario Draghi, the ECB chief, stated that the bank was prepared to take the necessary measures to assist the European economy and keep it from further deflation. Across the board markets reacted positively with nearly all the European indexes posting gains above 1%, everyone except the UK as they had a banking holiday.
Today it is expected to be slightly calmer with many indexes opening up lower, apart from the UK with the FTSE seen opening up as much as 0.5%.
The news coming from the ECB hints at Targeted Longer Term Refinancing Operations (TLTRO) and outright Asset Backed Securities (ABS) being the way forward in their attempt to stem the stagnation within the European economy.
With economic data pointing to a Germany that is seeing its economy start to lose momentum, with manufacturing and production dropping for the first time in recent months and a Chancellor busy trying to calm her Russia friends; Portugal with its largest bank failing and requiring substantial restructuring;
Speculation is that the ECB will make an announcement as soon as next week. If this is the case, it does go some way to ease investors concerns that the ECB may not be doing enough or reacting accordingly.
The measures implement just a few months ago did little to spur the ailing European economies and Mr. Draghi and his fellow policy makers at the ECB must know that any new policies implemented will need to have more impact this time and be more specific in their targeting.
The one thing the announcement did do was provide confidence for economies not in the EU with Asia benefiting from a weakened Euro and banking stocks in the US seeing confidence that their exposure to the EU was not as dangerous as previously thought. The Euro dropped to its lowest level on Monday seeing 1.3191 against the USD.
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