With more than five years’ experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic research.
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It’s possible that Draghi-and investors-underestimated the roadblocks thrown in the ECB’s way by the Governing Council’s hawks, said Carsten Brzeski, economist at ING Bank in Brussels, in a note.
“This brings us to today’s United States employment report for November”.
“Bear in mind that Super Mario has accustomed market participants to surpass their lofty expectations”, Stephane Ekolo, chief European strategist at Market Securities, said, using a common Draghi nickname.
Hong Kong was 0.8 percent off by the end. Disillusionment with Draghi’s announcement dragged the index to its biggest loss since August, contributing to a selloff that wiped about US$270 billion from the value of global equities.
On Friday morning in Europe, London shed 0.4 percent, Frankfurt slid 0.2 percent and Paris lost 0.3 percent. The German and French bourses were on course for a weekly fall of nearly 5 per cent.
The broad-based S&P 500 fell 29.89 points (1.44 per cent) to 2,049.62, while the tech-rich Nasdaq Composite Index dropped 85.70 points (1.67 per cent) to 5,037.53. Market psychology plays a major role in the success of monetary policy and investors must feel confident in the ECB’s ability to steer area-wide inflation to its target of “close to but just under 2.0 percent”.
Draghi stated that the European Central Bank is set to cut interest rates by 10 basis points to minus 0.3 percent. It also chose not to boost the amount of government bonds it buys each month through its stimulus program, which aims to help the economy by cutting loan rates.
“A strong U.S. report could have the effect of offsetting the Draghi let-down and stabilise the USA dollar against the surging euro”.
Yellen, Chair at the US Federal Reserve, in a testimony before Congress, said the American central bank was optimistic of an improved job market and that this was backed by positive economic data since October. Dampening these hopes now gives the governor more room to work later on. “While the markets would probably respond very negatively to a non-farm payrolls number of around 100,000, I don’t think even this would be enough to deter Fed officials so the bar really is very low”.
However, the Bank of Thailand insists the ECB decision was expected by many, even though the size of the additional quantitative easing was not as high as some had predicted.
Bonds stabilised after Thursday’s surge.
Oil prices extended a rally from Thursday, clawing back a large portion of the huge losses suffered the previous day ahead of OPEC’s policy meeting in Vienna on Friday. Saudi Arabia has told other members it has no intention of floating a proposal for curbing output, according to sources.
Australian government bond yields rose on Friday, but bond yields (implied by futures) retraced some of those gains on Friday night, tracking the move in U.S. yields.
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Market opinion of the European Central Bank policy meeting was not favourable, especially the decision to extend and not expand the EUR60 billion of QE per month.
