Thungen Financial 2nd September 2014 - European Economic Update
Markets are expected to open flat today as Europe awaits Thursdays meeting of the ECB and the potential for an announcement on policy change.
The European Central Bank has implied that it is ready and able to implement some form of stimulus for the Eurozone economy however very few expect this to happen as soon as this week.
With yesterdays Purchasing Managers Index's (PMI) disappointing results there has never been a more poignant time in European monetary policy. The Markit's PMI Index for August came in at 50.7, substantially below July's reported figures of 51.8 and largely attributed to the growing crisis with Russia and existing economic issues in many of its member states. Germany, one of the largest traders with Russia saw its individual PMI reduce to 51.4, a sign that the sanctions being imposed are starting to affect even the strongest of the EU economies.
Considering that Italy, Spain and even Holland are starting to report issues with their domestic economies and that France is being seen as already in recession there is a lack of good news coming out of Europe.
With inflation dropping to 0.3% there really is nothing else for Mario Draghi to do but take steps to address the situation he is seeing and apply a level of stimulus that keeps further deflation at bay.
As the US exits their QE strategy, the Eurozone appears to be just about to enter theirs.
The direction the ECB takes will be one of the most important decisions made regarding monetary policy in recent history and it is vital that any program of specific asset buying addresses the immediate needs of the EU and its members.
Much relies on the meeting and the actions taken later this week in Frankfurt.
Major European Markets as of 2nd September 2014
FTSE 6,825.31 (+0.08%) Dax 9,479.03 (+0.09%)
CaC 40 4,379.73 (-0.03%)
Bel 20 3,180.69 (-0.38%) IBEX 10,746.50 (+0.17%)
MICEX 1,400.71 (+0.87%)
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