Stocks in Europe have slipped Thursday afternoon, losing composure after ECB chief Mario Draghi says at the monthly press conference that negative deposit rate being on the shelf and the central bank is technically ready for them. That said, the euro has hit its highest level in a month as the ECB revises 2014 growth upwards. German government bonds sold off in reaction and stocks have edged lower. The ECB did downgrade GDP forecasts for 2013 however but Draghi noted that negative deposit rates is one of many measures the central bank has discussed, indicating to markets the central bank has enough gun powder in its arsenal to stimulate the economy. The comments on the whole are being regarded by markets as “hawkish” with Draghi not hinting on the use of any measures any time soon. Draghi also kept tight lipped on the possibility of ABS/SME facilities but did say the OMT is probably the most successful monetary measure in some time and brought stability to markets. Earlier, the ECB retained policies with the refi rate at 0.5% and the deposit rate at 0%, in line with expectations. The BOE also retained policies, keeping rates at 0.5% and QE at £375billion which is no surprise given the improvement noted in UK economic data. Outgoing Governor King is likely to have been outvoted again on QE and now the focus will shift to incoming Governor Mark Carney who starts in July. Looking at other events which have recently taken place, US jobless claims fell by 11k last week to 346k, in line with expectations and doing little to change the markets’ current uncertainty over “will the Fed or won’t the Fed” taper asset purchases in forthcoming months. The report has not provided any clues given yesterday’s poor ADP and now this half-decent outcome. Now, the focus has firmly shifted to tomorrow’s nonfarm payrolls report to provide some clarity over upcoming Fed policy measures. Attention today will also be on comments from Fed member Raskin. Elsewhere, Turkey’s BIST-100 index slides around 6% after PM Erdogan maintained his tough stance against anti-government protests which have spread nationwide over the past week. Erdogan said protests are not allowed and his government will push ahead with the construction project in Istanbul, which was the initial driver behind the protests. Turkey’s Lira falls to weakest level versus the euro since November 2011. Not a smart move by Erdogan as his comments threaten to incite further tensions, which could prompt greater unrest and violence in the country. Turkish Army is said to have moved tanks and other military vehicles to its border with Syria as tensions escalate. A rapid acceleration of this unrest could turn this into’s Turkey’s own “Arab Spring” though Erdogan has been democratically elected. Still, political uncertainty in the country would prompt a broad-based selloff for Turkish markets and rating agencies will be quick to place the country’s credit rating under the chop. ________________________________________ Ishaq Siddiqi Market Strategist
Posted on: Thu, 06 Jun 2013 13:32:38 +0000
Trending Topics
Recently Viewed Topics
© 2015