Europe close: Stocks dip as ECB's Draghi dashes hopes for policy change

Adjust Comment Print

The Euro has steadily gained against the Pound today, despite the largely dovish slant to the European Central Bank (ECB) meeting and the better-than-expected United Kingdom retail sales. The benchmark erased a gain that had reached 0.5 per cent before Mr Draghi said officials would discuss altering the central bank's bond-buying programme in an autumn meeting, at a press conference in Frankfurt.

Whilst Draghi did not directly set a time frame for the tightening of the ECB's now extremely loose monetary policy, he did assert that policymakers were "unanimously agreed" that such talks will, and should take place during the summer recess.

"They are going to try and not upset markets", said Nick Gartside, worldwide Chief Investment Officer of fixed income at JP Morgan Asset Management. ECB President Mario Draghi was rather vague in his rhetoric - with no "specific" developments but that there is still much "uncertainty" about the eurozone's future.

"Draghi's speech was essentially dovish, emphasizing a "very substantial degree of accommodation" and reaffirming the commitment to quantitative easing", Mitsubishi analyst Jonathan Butler said.

Analysts have been expecting the ECB to give a clearer sign at the September 7 meeting of when it might start decreasing its 60 billion euros ($69 million) in bond purchases, which are aimed at raising inflation from 1.3 percent toward the bank's goal of just under 2 percent.

The yield on the 10-year USA bond was at 2.2512% from 2.2708%. Increasing the supply of money in the economy can in theory raise inflation. Thursday's statement "was a clear sign that the European Central Bank does not want to pour more oil on the small taper tantrum fire seen in financial markets over the past week weeks", Brzeski wrote.

Google Glass Enterprise Edition is here
Some of these businesses have adapted to the use of Google Glass so well they have made massive reductions in production time. For an idea of Glass' new lease on life, Google points to Agco , a manufacturer and distributor of agricultural equipment.

Draghi's June 27 comments in Sintra, Portugal, hinting at the possibility of changes to the central bank's aggressive stimulus sparked a "taper tantrum" that sent the euro and bond yields sharply higher. Market analysts expect the purchases to decrease and then end next year, and for Draghi to send a clear signal about that at the September 7 meeting.

"With inflation firmly under control, the Reserve Bank showed courage by breaking out of its paradigm of being fearful of lowering interest rates", said union UASA spokesperson Andre Venter.

"The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases", the bank said in a statement.

'An ever larger number of passengers are flying EasyJet, two million more this quarter than a year previously.The probmem is that EasyJet is struggling to get its new passengers to pay the same as the old ones did, ' said Nicholas Hyett, equity analyst at Hargreaves Lansdown.

Simply put, investors still largely expect the European Central Bank to begin tapering those purchases in 2018, eventually winding them down. AIB was down 2 per cent to €4.88, while Bank of Ireland was flat at €6.90.

Comments