Market Action

  • Markets got the sugar rush they had long been craving as Mario Draghi announced a QE program involving €60 billion per month starting next month through at least September 2016. Equities around the world rallied, including the U.S. where the major indices wiped out most of their YTD losses.
  • While on the surface the action has been welcomed there is much to decipher in the ECBs efforts. It is unclear for instance how much of this is action is new as covered bond purchases started in the fall of 2014 in unknown amounts. Understanding just how incremental Thursday’s announcement from other programs is mystifying.
  • Elsewhere in Europe Denmark moved rates into negative territory to defend their fixed rate with the Euro. Speculators have tested the band in light of Switzerland’s move last week.
  • Chinese markets experienced a turbulent week. The Shanghai stock market fell over 7% on Monday as regulators tightened margin requirements. Two days later the index had largely recovered amidst statements from regulators that their intention was not to tighten. To reassure markets the central bank pumped 8 billion yuan into markets Thursday.
  • China also announced 2014 growth came in at 7.4%, just shy of their 7.5% target. Private sector estimates have the growth rate as low as 5%. The numbers were released amidst more fears in the property market, including the default of Kaisa, a developer, which just six months ago appeared to be in fine financial health.
  • The IMF lowered global growth forecasts for 2015. The institution also stated that India’s growth rate could surpass that of China by 2016.
  • Canada surprised markets with a rate cut on Tuesday. The country is suffering from low oil prices and slowing Chinese demand. In addition, some fear the country is in the midst of a property bubble.
  • Iraq announced record oil output even in the midst of civil turmoil and the encroachment of ISIS.


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