• 5 hours New Allegations Against Huawei Raise Tensions In Tech Cold War
  • 8 hours Chinese Investments In the U.S. Plunge 90% Under Trump
  • 11 hours Mining Major Sets Aside $400 Million To Reduce Emissions
  • 13 hours Golden Ice Cream And Spiced Vodka: The Craziest Things Made From Gold
  • 1 day Can Twitter Sway Economic Policy?
  • 1 day Widespread Power Outages Hit New York City
  • 1 day Equifax To Pay $700 Million To Settle Data Breach Case
  • 2 days Netflix Struggles To Rebound After Subscriber Hit
  • 2 days $15,000 For Your Crypto’s Ticket To Visibility
  • 3 days The Next Fashion Frontier
  • 4 days What Is Africa’s Role In The New Silk Road?
  • 5 days Trump Was Right About The Dollar
  • 5 days Is Silver Gearing Up For A Rally?
  • 5 days World’s Largest Hedge Fund Turns Bullish On Gold
  • 6 days It’s Time To Spend More On Clean Energy R&D
  • 6 days Contrarian Investors Are Beating The Stock Market
  • 6 days Bulgaria’s Revenue Agency Falls Victim To Biggest Cyber Heist In History
  • 6 days Amazon Faces European Union Anti-Trust Probe
  • 7 days Commodities Are Having A Stellar Year
  • 7 days Bezos’ Next Big Project Could Be Worth $100 Billion Per Year
Market Sentiment At Its Lowest In 10 Months

Market Sentiment At Its Lowest In 10 Months

Stocks sold off last week…

The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

  1. Home
  2. Markets
  3. Other

Dollar Sinks, Bonds Sink as ECB's Rate Cut to -0.3% and Pledge of More QE Until March 2017 'or Beyond' Not Dovish Enough

ECB president Mario Draghi's announcement today regarding more QE fell far short of the sky-high expectations of market participants.


Draghi Recap

  1. ECB would continue its ?60bn-a-month bond buying program for another 6 months until March 2017 "or beyond".
  2. ECB reduced key interest rate to a historic low of minus 0.3 percent.
  3. ECB pledged to buy more assets with the proceeds of its existing bond purchases.
  4. ECB announced it would buy municipal bonds in addition to standard government debt.


Japanesque Announcement Not Enough

Somehow that was not enough to excite the market. Here's an amusing quote courtesy of the Financial Times.

"The ECB delivered at the very low end of expectations," said Andrew Balls, chief officer for fixed income at Pimco. "There wasn't much to get excited about?.?.?.?markets were expecting an increase in the monthly purchase size."

Further negative interest rates were "nothing to get excited about". Apparently the only thing that would have satisfied Balls would have been an announcement the ECB would purchase still more European public debt securities.

Why not just buy them all and get it over with? Japan is effectively there right now.


Market Response

  • Index of Europe's 300 largest listed companies dropped 2.9%
  • Germany's DAX fell 3.0%
  • France's CAC 40 lost 3.2%
  • UK's FTSE 100 dipped 1.9%
  • US S&P 500 down 1.1% (market still open)
  • US DOW down 1.0% (market still open)


US Dollar 15-Minute Chart

US Dollar 15-Minute Chart

After surging yesterday to a high last seen in March of 2003, the dollar index pluinged 2% over the course of four hours today.


US 10-Year Treasury Yield 15-Minute Chart

US 10-Year Treasury Yield 15-Minute Chart


More, More, More

The markets are clearly hooked on easing, always demanding more, more, and more. Japanesque announcements are simply not enough, nor are below zero interest rates to the tune of -0.3 percent.

Good luck with that.

 

Back to homepage

Leave a comment

Leave a comment