Monday, 23 July, 2018

European shares boosted by cautious ECB comments

Deutsche Bank Says ECB Cautious Amid Trade Uncertainty Deutsche Bank Says ECB Cautious Amid Trade Uncertainty
Kenny Thornton | 09 March, 2018, 14:27

Major U.S. stock indexes closed higher and Canadian and Mexican currencies gained briefly on Thursday after U.S. President Donald Trump set tariffs on steel and aluminium imports but exempted Canada and Mexico.

Shortly after the announcement of the bank's decision, the Euro appreciated by 0.06% to 1.2419 United States dollars.

He told a news conference Thursday that trade disputes should be resolved in multi-lateral negotiations, such as in the World Trade Organization. "This outlook for growth confirms our confidence that inflation will converge towards our inflation aim of below, but close to, 2% over the medium term", Draghi said in his opening statement.

The bank has said the purchases will continue at least through September but has given no fixed end date.

The ECB will reinvest the principal repayments of maturing securities acquired under the asset purchase program for a prolonged period after the net asset purchase has ended and in any case as long as necessary.

The European Central Bank, once again and in line with market expectations, has left key interest rates unchanged at its current low levels.

Although the European Central Bank dropped its pledge to increase its bond buying if needed, comments by President Mario Draghi that policy would remain "reactive" and that measures of underlying inflation were still subdued weighed on the euro, which in turn benefited Europe's exporter stocks.

Benchmark U.S. 10-year notes last rose 7/32 in price to yield 2.8571 percent, from 2.883 percent late on Wednesday.

Crossing the Trough       Euro-area price growth has edged lower lately but is expected to gradually pick up              Source Eurostat ECB
Crossing the Trough Euro-area price growth has edged lower lately but is expected to gradually pick up Source Eurostat ECB

The currency rose 0.24 per cent against sterling, to £0.8952, and 0.19 per cent against the dollar, to $1.2435, after the ECB's governing council kept its three main interest rates on hold.

Stimulus withdrawal could mean a stronger euro versus the dollar, higher returns on savings and stiffer borrowing costs for indebted governments in the 19-country eurozone.

Markets are waiting to see whether the European Central Bank will drop any hints about when its economic stimulus will end.

The ECB President Mario Draghi said previous year that the bank had defeated the threat of deflation.

The stimulus program, known as quantitative easing, pushes newly printed money into the economy.

Recently, the gold market has been highly sensitive to currency markets, specifically movements in the US dollar, but the focus could now be shifting to interest rates.

European and USA stocks rose on Thursday as traders took a break from worrying about a global trade war and focused instead on the ECB's plans to end its €2.5-trillion stimulus programme.

Populist movement makes inroads in Italian elections
Italy is the epicenter of the problems facing establishment European politicians for both recent and more historical reasons. Renzi's attitude is a serious threat to the PD, as it could strike the final blow to a party already in a deep crisis .

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