Markets Poised to Fly or Cry on Draghi’s Words
March 10, 2016
Short and sweet today…
The Telegraph are putting more pro Brexit spin on their stories, dragging comments from Iceland's PM into the mix. He says the UK's power in Europe is diminishing and the EU's go to process is a Franco-German decision followed by the rest of the EU approving it.
Overnight polls say it's 41% to leave and 40% to stay. (this is barely worth the column inch it takes up!)
The ECB have started asking questions of banks over Brexit and their ability to cope with large moves in FX markets and what this means to their abilities to pay margin calls. This is advice we feel everyone, not just banks should be looking into.
New Zealand have surprised markets and cut rates, as well as indicating there's at least one more cut to come. It's the same story for the Kiwi's as for everyone else. Low inflation and a desire to weaken their currency to promote exports, in lieu of domestic demand.
North Korea have fired a couple of missiles in to the sea overnight, after claiming that they have the ability to load the same missiles with nuclear warheads. As well as beating their military chests, they've said they'll liquidate their economic ties with the south, closing the jointly operated Kaesong industrial complex.
Former Fed Chairman Bernanke has said that China shouldn't plough money into infrastructure to bolster its economy, but should instead focus on creating 'income security' for citizens with policies such as tax cuts and improving the pensions system, to encourage a long term domestic re-balancing.
Japan are weighing whether to delay their sales tax hike, again. The government are concerned that a 2% hike in sales tax will derail their efforts to foster growth, but economists are warning against delaying the increase because at some point the government will need to start collecting money to pay down its debt pile (the largest in the world at $100,000 per capita)
Today is the day for those wanting to see the ECB act. Expectations are high and we think the market has already priced in additional monthly asset purchases, or a cut to rates. We'll need to see Draghi bring out his A game if he's to convince markets his plans can work, particularly as a lot of other central banks are talking about the limitations of negative rates and how potentially damaging they are to the banking sector.
Run down to follow tomorrow….
Have a great day