Home Business The ECB is not convincing. Bags again in heavy red (Milan -3%)

The ECB is not convincing. Bags again in heavy red (Milan -3%)

by admin
The ECB is not convincing.  Bags again in heavy red (Milan -3%)

After yesterday’s attempted recovery, the European stock exchanges are once again taking the path of descent. Shortly after 12:00, the main squares of the Old Continent suffered heavy losses. In Milan, the FtseMib is in the red by 2.90% while Frankfurt loses 2.71%, Paris 2% and Madrid 1.4%. Futures on US markets are also negative (-2% for the Dow Jones and -2.5% for the Nasdaq) and indicate a heavy start to the session for the American stock market.

Yesterday, investors reacted positively to the huge rate hike decided in the evening by the Fed. The US central bank raised the cost of money in America by 0.75%. The move by the ECB was also welcomed, which yesterday, in a surprise meeting, showed that it wanted to intervene decisively on the spread of the spread.

The stock exchanges had regained confidence to close with solid rises. Today, however, operators seem to evaluate the news that arrived yesterday with more skepticism. Operators do not find yesterday’s statements by the ECB convincing. In the background, fears remain over the trend in inflation, economic growth and the effects of the acceleration in monetary tightening by central banks. This morning, unexpectedly, the Swiss National Bank also raised the cost of money by half a point. Governor Thomas Jordan has warned that other measures will be taken.

In the climate of general nervousness, the pressure on Italy’s debt is back again with the BTP back on the sales list, after yesterday’s relief break. The ten-year yield rises again and reaches 3.93% (+13 basis points) while the spread is back in the area of ​​221 basis points.

See also  Defeated like a mountain!Iron ore plunged 11% again, the higher level has fallen by 60%-Wall Street

According to analysts, the ECB must now act quickly. “James Ringer, Schroders Fixed Income Portfolio Manager argues that” yesterday’s announcement (by the ECB) represents a step in the right direction, but it did not meet expectations of an immediate implementation of an anti-fragmentation tool. ” The expert explains that many times, in the past, the ECB has referred to the use of PEPP reinvestments to direct purchases to one country rather than another. This intention was confirmed again in Schnabel’s speech the other night, therefore, it is not new. What is new, however, is the mention of the new anti-fragmentation instrument, which however has yet to be finalized before being approved by the Governing Council “.

In short, it seems that peripheral spreads and all-in yields have reached the point where the ECB is forced to reaffirm its commitment to support these markets. However, the reinvestment plan is nothing new and it remains to be seen how quickly the anti-fragmentation tool can be implemented. We expect yesterday’s news to provide temporary relief and ultimately limit the level of BTP-Bund spreads, but we think the market will continue to challenge the ECB and push spreads towards recent highs. “

Yesterday, “all euro area securities saw yields decline, but above all Italian 10-year yields fell by over 35 bps on the day, narrowing spreads with Germany by around 25 bps – comments Jason Simpson, SPDR ETF – State Street Global Advisors -. But this must be followed by concrete actions, otherwise the ECB risks undermining its credibility. After all, the only reason why ECB President Draghi’s July 2012 “Whatever it takes” worked in reviving the markets is that people believed him ».

See also  The 360 ​​IOU App is back on the shelves?Official response: The rectification plan has passed acceptance-Qihoo 奇虎360安全卫士

Several variables weigh on the current context and the gaze is also turned to the war in Ukraine. For Peter Garnry, Head of Equity Strategy BG Saxo “the main hypothesis is that the current drawdown is a mix of the dynamics seen during the new economy bubble of the early 2000s (that of the dot-coms) and the energy crisis of the ’70 “. For the expert, “in addition to the inflation data in the United States, the world was also able to” see the cards “of Putin who, in a speech a few days ago, said that he considers himself the new Peter the Great, or that his current policy is, in reality, a crusade to “take back the Russian lands”.

It is therefore clearer that Russia is using the war in Ukraine to stage a food crisis. In this regard, Yale history professor Timothy Snyder argues that Russia’s deliberate strategy is to cause a crisis that will hit Africa hard and could cause disruptive flows of immigrants to Europe that will destabilize the continent. Market participants are increasingly preparing for an energy and food crisis that will extend into 2023, exert upward pressure on inflation and cause an economic recession in many emerging market countries. “

You may also like

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More

Privacy & Cookies Policy