The European Central Bank has not changed its interest rates, which is not a surprise, but she especially given go to the market. She could “re-evaluate and probably revise” its monetary policy in March, said its president Mario Draghi. The ECB considers indeed “necessary” the review given the risks that are compounded in the world and especially the price of oil has plunged again Wednesday by 6.7%. The ECB did not “capitulate”! This promise has awakened the financial markets that remained in disappointment with regard to the monetary policy of the ECB in December. Mario Draghi has not fired a bazooka, but he came out of the closet. Indeed, he warned that there was “no limit” the use by the ECB for monetary policy instruments. What revive the imagination of the markets that the ECB could do in two months. This is what had already allowed markets to go back in October. Franck Dixmier, Allianz GI, “it was urgent to intervene, it was also a question of credibility and it did. The challenge for Mario Draghi is to convince markets of its ability to respond to the risk of deflation becomes increasingly important when in two months, there has been a worsening of the economy and a significant increased uncertainty with political risk has increased, including in the eurozone. So we waited for a response from the ECB, given the collapse in inflation expectations, returned to the level before the start of the QE, a year ago. ”
Reassure and monitor
He also wanted reassurance on China, saying the “progressive deceleration of China meets the expectations of the ECB, which is monitoring the situation. ” In early 2015, the ECB had fallen asleep volatility in markets and Mario Draghi hope that the air will lull them again with a soft quietude. “Faced with a high risk of deflation, the challenge for Mario Draghi is to convince the ability of the Central Bank to act, since, under the combined effect of slowing growth in China, the weakness of the Renminbi and dramatic fall in oil prices, inflation expectations in the euro area dropped sharply to reach levels close to those before the EQ, making the latest inflation forecasts obsolete ECB. Such a development is likely to provoke a strong response in terms of monetary policy, “said Franck Dixmier at Allianz GI.
Asset Redemption
The market reaction was not long in coming. The euro initially, who had approached the $ 1.10 in recent days, has lost again ground to less than 1,082 dollars. Bond rates have also significantly relaxed, including the peripheral markets. German 10-year rate drops to 0.452% (- 3.5 bps), while the rate of OAT French is 0.776% (-5 bps). Especially, the Spanish rate, Portuguese and Italian lost more than 10 basis points. The focus of the ECB comes into effect at the right time as markets were concerned about the institutional deadlock in the Iberian Peninsula, but also the health of Italian and Portuguese banks. “The ECB will continue to empty fixed income markets,” says Guillaume Truttmann at Quilvest AM, reminiscent of that market liquidity is expected to be reduced because of QE, the asset purchases by the ECB indeed exceed the net emissions the States of the euro area. “We still feel that the ECB has missed an opportunity to do more in December, while it had generated a lot of expectation. For now, we have not had time to make us consider the effects of these new measures, and now she could announce further in March, “lamented his side Bissat Valentin, economist and strategist at Mirabaud AM …
Support of the ECB
Finally, equity markets have also quickly resumed. The Paris Bourse painfully gained 0.1% in the morning after a new black day, gained up to 2.66% in 4234, before the CAC 40 index would reduce earnings due to instability oil market, Brent crude settling below 28 dollars. The Paris Bourse nevertheless closed up 1.97% to 4206 points. “The ECB will continue to be supportive for the markets,” said William Truttmann. “The ANC has already helped to reverse the trend on inflation to calm fears about deflation, to influence growth in the euro area and restart lending.” But markets still volatile, still remain at the thank you of the geopolitical and oil disorders.
As for values, there are only two values down on the CAC 40: Accor (-2.20%), Legrand (-0.58%). Conversely, ArcelorMittal wins more than 10%, Technip rebounded 7.71% and Peugeot was up 5.15%
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