Markets fall as ECB doesn't deliver QE for Christmas – as it happened
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Version 0 of 1. 5.38pm GMT17:38 Closing post: Draghi gives markets a reality check So, no festive cheer from the ECB today. Simply a dose of downgraded economic forecasts, which might be even worse once the slide in the oil price feeds through to consumers. Although Mario Draghi was as commanding as ever at his press conference, he couldn’t cover up the fact that the Governing Council is not united about the prospect of embarking on a full-blooded quantitative easing programme. He might be able to talk the Council round, or simply override then, but today was a reminder that the road to QE is paved with pitfalls. And that sent the main European markets into the red tonight. Here’s the closing prices: And the euro remains higher tonight, up almost 1% at $1.2381. Ranko Berich, head of market analysis at Monex Europe, reckons the ECB is close to launching QE, though: “The most significant part of the press conference was the official statement that the Governing Council would reassess the asset purchasing situation early in 2015. Markets now have a fairly firm timetable for when the ECB will need to admit that inflation is showing no signs of improvement.“Unless a monetary miracle occurs and inflation improves drastically, by the time of the first Governing Council meetings next year, the ECB will have little choice but to act.” Reminder, my summary of the press conference is here: ECB press conference: What we learned. Highlights start here. And analyst reaction starts here. I’ll be back tomorrow. Cheers ,and goodnight. GW 5.22pm GMT17:22 JP Morgan is concerned by the splits in the ECB’s governing council. JPM: "it is hard to escape from the feeling that Draghi is having difficulty in building consensus for sovereign QE" 5.14pm GMT17:14 Credit Agricole: Oil price falls could pull inflation below zero The tumble in the oil price over the last week could drive the eurozone inflation rate slightly below zero in the coming months, says Credit Agricole analyst Frederik Dukrozet. As flagged up earlier, the latest ECB staff forecasts were conducted before Opec launched a price war a week ago by not cutting production. Credit Agricole’s updated inflation projections include “a high risk of slightly negative” harmonised eurozone inflation rates at the turn of the year, Frederik writes in a note to clients (online here). And here’s the chart: Frederik also suggests eurozone inflation could be forecast to return to target in 2017, which would remove pressure for QE. In the medium-term, however, a decline in oil prices that is likely to be largely supply-led is supposed to have a net positive impact on growth, a “mini-stimulus” as Weidmann called it. Taking all the above elements into account, we suspect that the 2017 HICP projection, which will be included in the staff forecasts in March 2015, will be at around 1.7% or so. If the ECB has not launched sovereign QE by then, this kind of number would hardly help the doves to push their argument. Updated at 5.20pm GMT 4.56pm GMT16:56 Look how the euro spiked after the ECB failed to deliver the QE that some had expected: Christopher Vecchio, currency analyst at DailyFX, points out that traders must wait around six weeks for the next meeting: We now enter a long interim period between meetings, as the next one doesn’t arrive until late-January (the ECB is switching to an eight meeting schedule in 2015), allowing plenty of time for the ECB to assess whether or not it needs to engage in more aggressive easing policies in order to stoke growth and inflation. If prolonged lower inflation continues – a realistic possibility given the downside pressure in energy prices – it’s just a matter of when the ECB will succumb to a QE program Updated at 4.58pm GMT 4.43pm GMT16:43 This handy graph shows how the ECB’s balance sheet has contracted since early 2012 (which was the time it showered the banking sector with hundreds of billions of euros in cheap loans): The ECB "intends" to get balance sheet back to ~€3 trln. It's a tall order. via @ReutersGraphics: pic.twitter.com/Py88ImYZAb 4.38pm GMT16:38 The German DAX had hit a new record high today, puffed up by QE hopes, before deflating as Draghi spoke. Jasper Lawler of CMC Markets says: Mario Draghi appeared a little wearier in his December press conference, perhaps already looking towards his Christmas holiday. The ECB President has been walking a tightrope of keeping expectations of quantitative easing alive while acknowledging that the governing council has not reached consensus that this is the best course of action to fulfil its mandate of price stability. 4.15pm GMT16:15 ING: QE is coming.... The ECB will probably launch a full QE programme early next year, despite the opposition of some in the governing council, says Carsten Brzeski of ING. He’s struck by “the inflationary number” of times Draghi uttered the word “QE” at today’s press conference, compared to previous ones. The scene is clearly set for QE. Draghi’s comments during the Q&A could hardly leave any doubt: the ECB is determined to start some kind of QE in 2015. Brzeski points to the fact that the ECB will look at the impact of falling oil prices - clearly deflationary, and the hardening-up of Draghi’s opening statement: The slight change in tone that the ECB now “intended” and no longer “expected” the current measures to reach the size of the balance sheet from 2012 was the last evidence of the ECB’s determination. 3.52pm GMT15:52 The euro continues to push higher too, up almost 1% at $1.243. Alex Edwards, head of the corporate desk at UKForex, says Draghi was “less dovish” than traders had expected. The central bank did not announce any further liquidity measures and certainly didn’t indicate any immediate intentions to implement full blown QE. It’s a bit at odds with the most recent rhetoric and provides a boost to the euro, if only a temporary one. However, Edwards reckons QE is “still on the cards”: It wouldn’t surprising to see the ECB push the idea early next year, putting more pressure on the single currency. 3.48pm GMT15:48 European markets fall amid QE disappointment European stock markets have all fallen sharply since it became clear that the ECB was divided over launching fresh stimulus measures. The French CAC has fallen 1.4%, Germany’s DAX is down 1%, while the Spanish and Italian indices are both down around 2%. The selloff began as Draghi admitted the governing council was not unanimous about “intending” to swell its balance sheet by another trillion euros. Alastair Winter, chief economist at Daniel Stewart & Co, says investors got carried away with the idea that the ECB was bound to launch QE soon. There has been no evidence that the Bundesbank had softened its opposition to sovereign QE, in fact the contrary judging by recent coded messages. The markets had simply got ahead of themselves. Mr Draghi revealed there was plenty of discussion but no agreement, even on dates. Winter is also struck by Mario Draghi’s declaration that QE is legal, and wouldn’t need unanimous support: Draghi might prefer consensus but if necessary he may be planning to outvote the Bundesbank and then argue that the politicians in Berlin and jurists in Karlsruhe need not get involved. That would really raises the stakes in the his poker game with the Germans and they will surely counter him. 3.28pm GMT15:28 ECB Press Conference: the key points As president Draghi heads off to swap presents and cards with the rest of the governing council (a lump of coal for Jens Weidmann?), let’s quickly recap. 1) Not tonight, Mario. The European Central Bank has resisted launching a quantitative easing programme today, despite the weak eurozone economy. Instead, the governing council has decided to reasses the impact of its existing monetary stimulus measures in early 2015. It could potentially change “the size, the pace and the composition of our measures.” So, we’re a step closer to QE in the eurozone - but not there yet. Draghi told reporters that the ECB needs time to assess the impact of the tumbling oil price: “The changes that have taken place in the price of oil are so meaningful -- just think that between June and today, the price of oil decreased by 30 percent in euro terms -- they need careful assessment ... We have to assess the direct effect, the indirect effect and whether there are going be second-round effects” 2) Cracks are appearing in the governing council.... The ECB has hardened up its desire to expand its balance sheet back to 2012 levels - taking it from €2trillion today back to €3trillion. But that decision was not unanimous; even some members of the executive council refused to back Draghi, he revealed. “Yes indeed, ‘intended’ is different from ‘expected’. It’s not simply an expectation, it’s an intention, it’s not yet a target, it’s something in between. It was the vast majority of the members of the Governing Council, but obviously it was not unanimous.” 3) ....But that might not stop QE. Draghi insisted that the ECB could launch a new stimulus package without unanimity: “It’s an important monetary policy measure, it can be designed, I believe, to have consensus. But we have to remember that we have a mandate, and as I said before, we don’t tolerate prolonged deviations from our mandate.” Draghi also rejected the notion that European treaties barred the ECB from buying government debt. 4) Anything but gold. The governing council considered a wide range of quantitative easing options, Draghi said. The only asset they didn’t talk about was gold. 5) Europe’s economy needs help. The ECB has cut its growth and inflation forecasts again. It now expects inflation to be just 1.6% in 2016, below target -- and that was before the oil price slide. Near-term ECB staff forecasts, as Draghi admitted, already off track given recent oil moves - likely negative in Q1. pic.twitter.com/FVyLcISdYC It also cut its growth forecast for 2014 to just 0.8%, rising slightly to 1% in 2015 and 1.5% in 2016. That’s down from 0.9% in 2014, 1.6% in 2015 and 1.9% in 2016 in the previous forecasts, three months ago. Draghi said the risks to the economic outlook remain on the downside: “In particular, the weak euro area growth momentum, along with high geopolitical risks, has the potential to dampen confidence and especially private investment.” Updated at 3.57pm GMT 2.46pm GMT14:46 But so much fun. RT @ecb: Draghi: Would not be best use of our time to discuss things that are illegal 2.35pm GMT14:35 The press conference ends with Draghi slapping down the idea that a sovereign QE programme would be illegal. Not to pursue our mandate would be illegal, he replies. 2.33pm GMT14:33 Draghi is asked about the rise of popularity of Syriza in Greece, and Podemos in Spain. He says he’s not sure exactly what these parties want from the ECB. "It is not entirely clear what changes they ask from our side" tells #Draghi to @syriza_gr and @ahorapodemos as he announces eventual QE 2.29pm GMT14:29 #ECB Draghi: We can not go against ECB treaty and do sovereign financing. 2.28pm GMT14:28 Would Draghi launch a QE programme even if a large minority of governing council members opposed it? It’s pointless to discuss what kind of majority would be needed until we know what kind of programme is being considered, he replies. 2.27pm GMT14:27 Isn’t QE illegal under European law, which rules out financing a member state’s debt? Draghi says that the ECB considered several kinds of QE, including buying sovereign debt. But that would be to meet its mandate, not to deliver monetary financing. That would not be acceptable, he smiles. 2.25pm GMT14:25 Could an ECB QE programme include other currencies? Draghi says the ECB doesn’t want to do that, as the exchange rate isn’t a target (that would take us into the realm of Currency Wars). So, QE will be (a) not gold. (b) denominated in €. (just for clarity) And was there unanimity within the ECB’s executive board? No. That board consists of Mario Draghi, Vítor Constâncio, along with Benoît Cœuré (France), Sabine Lautenschläger (Germany), Yves Mersch (Luxembourg) and Peter Praet (Belgium). No unanimity on the Executive Board wrt balance sheet language -> Lautenschlaeger, Mersch both likely dissenters. 2.20pm GMT14:20 The news that the ECB considered buying a wide range through quantitative easing (apart from gold!) has pulled the euro down a bit. 2.18pm GMT14:18 "Without being too specific in terms of the assets that would be included..." Too bad, that's the most important part. 2.18pm GMT14:18 What kind of assets did you discuss buying? US Treasuries, gold? My recollection is that we considered all assets, apart from gold, Draghi shoots back. 2.17pm GMT14:17 Is there time to persuade Germany of the merits of QE before the ECB’s March meeting? QE has worked in other countries, Draghi says. There is evidence that it could be effective. QE has been shown to be effective in US and UK, harder to say in Japan - Draghi But the initial conditions in the US and UK when they started QE are different than in the eurozone today - that’s another reason we haven’t taken a decision today. He repeats that the ECB has a mandate -- to deliver inflation close to, but below, 2%. We would never fail to stick to that mandate. #ECB Draghi: We don't need unanimity to agree on QE. Implies it will be agreed in case of prolongued lowflation. #euro Updated at 2.18pm GMT 2.14pm GMT14:14 Would the ECB need a unanimous decision to launch a QE programme? No, says Draghi. It would be an important move, but we have a mandate to fulfill. [So, Germany couldn’t block a QE programme on its own.] Draghi: We don't need unanimity but it can be designed to have consensus Updated at 2.16pm GMT 2.11pm GMT14:11 Up goes the euro, on the news that the ECB hasn’t taken any decisions on QE. Unintended consequences - lack of ECB urgency on QE will strengthen the euro. Up a cent already, back above $1.24: pic.twitter.com/gku6SGvwq9 Updated at 2.12pm GMT 2.11pm GMT14:11 Draghi’s vice-president Vítor Constâncio take the microphone. He says he was only expressing a “personal view” last week, when he said the ECB could launch full-blown QE in early 2015. He adds that the ECB faces a different challenge than other central banks when looking at sovereign QE, as it could potentially buy a range of government bonds. 2.08pm GMT14:08 Why isn’t the ECB taking fresh action now, rather than faffing around until 2015? (I paraphrase): Draghi concedes it’s a fair question. The changes in the oil price are so big that the ECB needs to take time to assess its impact, both positive and negative. That’s a reason to think more. Secondly, we have taken many significant decisions between June and September, and they haven’t all had their full effect. So the Council will take a bit more time to assess. 2.05pm GMT14:05 Here’s the key section of Mario Draghi’s statement: ....early next year the Governing Council will reassess the monetary stimulus achieved, the expansion of the balance sheet and the outlook for price developments. We will also evaluate the broader impact of recent oil price developments on medium-term inflation trends in the euro area. Should it become necessary to further address risks of too prolonged a period of low inflation, the Governing Council remains unanimous in its commitment to using additional unconventional instruments within its mandate. This would imply altering early next year the size, pace and composition of our measures. In response to the request of the Governing Council, ECB staff and the relevant Eurosystem committees have stepped up the technical preparations for further measures, which could, if needed, be implemented in a timely manner. All of our monetary policy measures are geared towards underpinning the firm anchoring of medium to long-term inflation expectations, in line with our aim of achieving inflation rates below, but close to, 2%, and contribute to a return of inflation rates towards that level. Introductory statement Mario Draghi to the press conference http://t.co/nTzE2uW8Us 2.03pm GMT14:03 Draghi is reiterating that the ECB will reassess the situation in early 2015, and examine the impact that the fall in the oil price has had on inflation, and inflation expectations. 2.00pm GMT14:00 The euro has strengthened since the press conference began - that suggests disappointment that Draghi hasn’t made a firmer commitment to QE (as monetary easing should weaken the currency). 2.00pm GMT14:00 A question about the ECB’s new offer of low-cost credit to banks (the TLTROs). It is very difficult to see what the full take-up of the TLTRO will be, Draghi replies; the conditions of the second wave of loans will be the same as the first. 1.56pm GMT13:56 Next question: What does Draghi think about EC president Jean-Claude Juncker’s new €310bn investment fund for European growth? Draghi says he supports it. It’s the only plan of its type we have right now, and we have great confidence in its success. Updated at 1.56pm GMT 1.55pm GMT13:55 *DRAGHI SAYS ECB NOT UNANIMOUS ON WORDING ON ECB BALANCE SHEET 1.54pm GMT13:54 Blackstone also asks whether the ECB has hardened up its plan to expand the balance sheet to 2012 levels. Yes, Draghi replies - we have changed the phrasing from an “expected” expansion to an “intended one”. That’s a harder commitment. And there was a very big majority in favour of this, but it wasn’t unanimous, he adds. Draghi: Target > Intended > Expected. (we are currently at 'intended' and the Germans are not even backing that) 1.53pm GMT13:53 Draghi: Oil price fall is good for Europe Brian Blackstone of the WSJ asks whether the ECB could decide whether to take the plunge into full-blown QE in seven weeks (it’s next meeting is in late January): On the first point, Draghi declines to say when the next decision will be taken. But he agrees that the ECB will have a lot of data to digest in January, including the slump in oil prices in the last week. The net impact of the oil price fall is unambiguously positive for Europe, he says. But it will also have an effect on inflation; especially if expectations of lower prices become embedded. The ECB thinks the weaker oil price could knock 0.4% off the harmonised inflation rate in 2014. But there will also be an impact on core inflation. 1.52pm GMT13:52 ECB Q&A begins Onto questions.... 1.49pm GMT13:49 , KICK,DRAGHI,ROAD,CAN,DOWN 1.48pm GMT13:48 Draghi ends with his usual plea to eurozone governments to implement structural reforms, and to use all available scope for ‘growth friendly fiscal policies”. 1.48pm GMT13:48 The ECB now expects eurozone GDP to rise by just 0.8% this year, 1.0% in 2015 and 1.5% in 2016. That’s weak And it has cut its inflation forecasts in 2014 to just 0.5%, from 0.6%. The figure for 2015 has been slashed to just 0.7%, from 1.1%. In 2016, it rises to 1.3%, down from 1.4% in the previous staff forecasts. 1.46pm GMT13:46 Draghi says the ECB’s growth and inflation forecasts have been revised down substantially; and he admits that these forecasts do not include the latest slump in oil prices. 1.45pm GMT13:45 So, the ECB won’t launch a government bond-buying programme today, but it might come before the spring... It sounds as though #Draghi will wish us a Merry Christmas and that we will find #QE under the tree in the New Year but not now! #ECB As expected, a more explicit albeit conditional commitment to do more "in a timely manner". Sorry guys, no ECB QE for Christmas. 1.44pm GMT13:44 Onto the ECB’s new forecasts, and Draghi says the eurozone faces lower inflation and weaker GDP growth. He points to the fall in oil prices. There’s a danger that weaker growth, and heightened geopolitical risks could hurt consumer confidence and deter private investment, he adds. 1.41pm GMT13:41 Draghi says the governing council remains unanimous that it will take further measures, if necessary. 1.40pm GMT13:40 Draghi: ECB to reassess stimulus measures in early 2015 INTERESTING. Draghi says that early next year the ECB will reassess the success of its existing stimulus programmes, and the impact of weak oil prices on the eurozone economy. The governing council could potentially change the size, scale and composition of its existing programmes. That’s a hint that further stimulus measures could be agreed in early 2015 -- potentially including sovereign QE? Draghi: We will also evaluate the broader impact of recent oil price developments on medium-term inflation trends in the euro area Updated at 1.41pm GMT 1.37pm GMT13:37 Onto the prepared statement. Draghi confirms that the ECB has left rates unchanged. The ECB has started purchasing covered bonds and asset-backed securities he says (yes we know that). The ECB will continue taking measures in the months ahead -- which will have a “sizeable impact on balance sheet”, and move it back to its level in early 2012 (when it was €3 trillion). 1.35pm GMT13:35 Draghi begins by welcoming the press to the new HQ, a project that dates back to the creation of the single currency union. 1.33pm GMT13:33 ECB press conference begins Mario Draghi has strode into the room, a few minutes behind schedule (for the second month running). This is the first press conference in the ECB’s new headquarters. 1.33pm GMT13:33 Where is Mr. Draghi? 1.28pm GMT13:28 Watch the press conference here Here’s a live feed of the ECB press conference - which I’ve also tried to add to the top of the blog. 1.16pm GMT13:16 The ECB press conference is one of the last set-piece events in the European economic calendar this year, so lets hope Mario Draghi is on his customary good form. Draghi Conference in 15 mins! #forex #news #ecb #draghi 1.13pm GMT13:13 Back in August, Mario Draghi identified inflation expectations as a key measure which the ECB would watch. This chart shows how they have fallen over the last four years, particularly in recent months. Dear Mr. #Draghi here is your one graph for this afternoon. #inflation expectations are coming down rapidly. pic.twitter.com/39tGINZ3Y5 1.05pm GMT13:05 ING economist Carsten Brzeski says president Draghi will probably reiterate the ECB’s determination to expand its balance sheet to the levels in 2012. That’s an extra trillion euros (from €2trn today). It's all about that bass...eh...balance sheet...Mario Draghi's favorite tune ahead of today's #ECB press conference. 1.03pm GMT13:03 All eyes will soon be on Frankfurt, says Daniel Sugarman, market strategist at ETX Capital: The markets will be watching events in Frankfurt closely...to see whether Mario Draghi will reveal any further details regarding Q.E measures to prevent another recession. 12.50pm GMT12:50 Monetary policy decisions: rates unchanged http://t.co/AaYQEAGcSS 12.49pm GMT12:49 ECB leaves interest rates unchanged The European Central Bank has voted to leave interest rates at their current record lows across the eurozone. That means the headline rate is pegged at just 0.05%; while banks are charged a negative rate of -0.2% to leave money with the ECB overnight. No change in policy from the ECB. Draghi spotted picking out a Christmas tie In 40 minutes we get the press conference, where Mario Draghi will be quizzed on issues such as QE, the state of the eurozone economy, the geopolitical situation, and more! Updated at 12.49pm GMT 12.39pm GMT12:39 Next up, the European Central Bank’s announcement at 12.45pm GMT (1.45pm Frankfurt time). Again, the markets aren’t expecting any change in monetary policy at today’s meeting (but they’ve been proved wrong before). The news should come 45 minutes later at Mario Draghi’s press conference – which is always good value. 12.22pm GMT12:22 Mark Miller, UK analyst at the Economist Intelligence Unit, predicts further inaction from the Bank of England: “The current period of subdued inflation pressures is dictating the path of UK monetary policy and low inflation seems likely to persist as we head into early 2015. We do not envisage an interest rate increase until well into the second half of next year” 12.08pm GMT12:08 BOE rates at 0.5%: 5 years, 9 months and counting... 12.07pm GMT12:07 We must wait almost two weeks for the minutes of today’s Bank of England meeting, to find out if the decision was unanimous. It probably wasn’t; in recent months, the MPC has split 7-2, and November’s minutes showed a range of views among the seven dovish members of the committee, suggesting some were close to voting to hike borrowing costs. 12.01pm GMT12:01 @BankofEngland maintains #BankRate at 0.5% and the size of the Asset Purchase Programme at £375 billion 12.00pm GMT12:00 Bank of England leaves rates unchanged To no-one’s surprise, the Bank of England has left UK interest rates at their current record low of 0.5% again. There’s also no change to its QE programme, and no statement. Move along, folks, there’s nothing to see. 11.52am GMT11:52 European consumers are among the most pessimistic about their financial security, in another nudge to the ECB to consider fresh stimulus today. Out Datablog editor, Alberto Nardelli, reports that European countries makes up six of the bottom eight countries in the latest Ipsos financial security monitor, a monthly survey carried out in 24 countries around the world. The data also shows that UK consumers have become more confident over the last couple of years, overtaking the global average. Brits are now more confident than Germans about making a major purchase, Alberto says. More here: Europeans still feel insecure when it comes to their personal finances 11.36am GMT11:36 I missed this earlier; France’s unemployment rate has reached its joint-highest level on record. The jobless rate hit 10.4% in the third quarter of this year, up from 10.1% in Q2. French unemployment jumps to 10.4% in Q3, equaling euro era high: pic.twitter.com/c8ksSdaaDI 11.24am GMT11:24 There’s a danger that Mario Draghi could disappoint the markets today. Bonds could fall if the ECB chief doesn’t give a hint, at least, that sovereign bond-buying programme is possible (even though it might not do much good) Scott Thiel of investment giant BlackRock fears German, Italian and Spanish bond prices have been driven too high by the prospect of a QE scheme. Thiel says (via Reuters): “I don’t find it an attractive market at all because it is going to be entirely dominated in the near term by the implementation of a QE programme.” “If it does nothing but foreshadows the implementation without giving more details I would suggest the market is priced for that already.” 10.58am GMT10:58 Euro hovering at 27-month low The euro is bobbing around its lowest level since August 2012 today, at $1.2315. Today’s ECB meeting follows a flurry of disappointing economic data this week, points out Nicholas Ebisch, currency analyst for Caxton FX: The Eurozone is struggling with low inflation at the moment, and it is often even failing to match the already low expectations that are forecast. Overall Eurozone Services PMI yesterday was at the lowest level since January, and retail sales figures undershot expectations. As further interest rate cuts aren’t really possible, there is more pressure on Mario Draghi to “commit to a firmer timeline for the expansion of ECB asset purchases in the early part of next year”, Ebisch adds. Updated at 10.58am GMT 10.44am GMT10:44 European bonds are pretty calm today, with prices down slightly. That doesn’t suggest investors suddenly expect a new ECB programme today: European government bond markets on Tradeweb this morning. pic.twitter.com/3DBLyiSQAx Prices are already at record highs, though, on predictions that the ECB will launch sovereign QE eventually. But would it actually do any good? Vincent Juvyns, global market strategist at JP Morgan Asset Management, says not: With German and French yields at 0.8% and 1.2%, and Spanish and Italian yields at 2.1% and 2.3%, one could question whether there is any conceivable benefit from buying sovereign debt. The political obstacles would be high, and Draghi could expend energy for limited reward in trying to surmount them. Juvyns reckons the ECB’s current offer of cheap credit to banks may well work, if it’s given time. 10.20am GMT10:20 A housekeeping note: this will be the first monthly press conference since the ECB moved to its new headquarters -- and it looks terribly swanky. First @ecb press conference in new building later today. Livestream later here http://t.co/7pHpnZHohc (in the meantime enjoy the new b-roll) 10.11am GMT10:11 Back to the European Central Bank’s meeting. Aengus Collins, lead analyst on the eurozone at Economist Intelligence Unit, says a sovereign QE programme would be “a political bridge too far”. He agrees that the ECB is more likely to start buying corporate bonds first, as a less contentious way of pumping more cash into banks (in the hope they pass it on). He adds that the focus on the ECB underlines how Europe’s political leaders are failing. “However, the fact that sovereign QE now dominates debate is an indicator of how damagingly dysfunctional economic policy-making is in the single currency area. Mario Draghi is doing his utmost to fulfil the bank’s de facto role as policy-maker of last resort, but with interest rates at the zero lower bound it is unreasonable to expect the ECB to get the euro zone economy up to escape velocity. “The recent announcement of a €3tn balance-sheet target was another helpful intervention from Mr Draghi, but it needs to be part of a much more concerted attempt to deliver a mix of fiscal, monetary and reforming policies appropriate to the dismally weak state of the bloc’s economy. That is something only political leaders are in a position to provide. Thus far, they are failing lamentably.” 10.03am GMT10:03 Σε εξέλιξη το διάγγελμα Putin προς τον ρωσικό λαό pic.twitter.com/zK9hibip5Z Insight into Putin's mind: says some countries would like Russia to be dismantled like Yugoslavia but Moscow wouldn't let it happen #Putin 10.01am GMT10:01 The Russian rouble has been fluctuating after president Vladimir Putin addressed the nation a few minutes ago. The rouble fell as Putin blamed Western governments for the Ukraine crisis, but rallied after he promised a string of business reforms, including an amnesty on capital returned to Russia from overseas and a freeze on some taxes. Putin also blamed speculators for the recent plunge in the rouble (down almost 40% this year). Paul Sonne, the Wall Street Journal’s Moscow correspondent, has tweeted the key points: Putin: "We have to remove the restrictions on business as much as possible." Putin calls for an "amnesty" on capital returning to Russia, meaning if people repatriate their money, they won't face tax/legal questions. Putin on ruble: "The government knows who the speculators are." Have methods of acting against them. 9.32am GMT09:32 UK car sales keep rising UK car sales jumped 8% year-on-year in November, in the 33rd consecutive month of rising sales. The Society of Motor Manufacturers and Traders credited rising consumer confidence in the UK; cheap credit, and the rise of deals where you effectively rent your new vehicle, are also factors, I think. SMMT also shows how demand for small cars, and ‘multi-purpose’ vehicles (four-wheel drive models) has risen in the last 15 years. 9.11am GMT09:11 Shares in Unilever have hit their highest level in a year, up 3%, after the consumer goods giant told investors it will spin off (churn?) its spreads business into a standalone unit. That includes kitchen staples such as Flora, Stork and I Can’t Believe It’s Not Butter; fastFT reckons private equity might be licking their lips. Unilever to spin off its spreads business http://t.co/2cjWtJinSr Updated at 9.17am GMT 8.55am GMT08:55 Investors will be watching to see how dovish Mario Draghi performs this afternoon, and whether he makes any promises about future QE. So says Kit Juckes of Société Générale: The main event of the day is the ECB meeting, almost universally expected to see no policy move. Mario Draghi’s final press conference of the year does afford an opportunity for him to go off piste however, something he has done before. Updated at 9.05am GMT 8.47am GMT08:47 Britain’s house price continues to cool, according to the latest figures from the Halifax building society. Prices were up 8.2% annually, in the three months to November, down from 8.8% a month ago, and the 10.2% recorded in the quarter to July. The more volatile monthly data showed a rise of 0.4% during October itself. House price growth slowdown continues. In 3 months to Nov prices rose 8.2% y-o-y, down from 8.8% in Oct, says Halifax pic.twitter.com/TDRjECUFnY Perhaps the stamp duty shake-up announced yesterday, which will cut the tax on less expensive homes, will give the market another boost.... *DJ UK Halifax Nov House Prices +0.4% On Mo, +8.2% On Yr . #stampduty #AutumnStatement Updated at 8.47am GMT 8.27am GMT08:27 Back in the markets, shares in Ryanair have jumped almost 10% after it raised its profit forecast. The budget airline, which recently adopted a revolutionary policy of being nicer to its customers, reported a 22% increase in traffic in November. It now expects to make between €810m and €830m, up from €750m to €770m. Now @Ryanair shares hit record high.Shares +10%...bet O'Leary's pleased he took leaf out of Carolyn McCall's book&got more customer-friendly 8.17am GMT08:17 Dimon: Europe will struggle to fix structural issues Jamie Dimon, the boss of JPMorgan, has predicted that Europe’s economic weakness will drag on for years. Speaking in Washington last night, Dimon warned that “Europe is going to be tough,” as political deadlock will hamper efforts to reform its economies. “They have all the same structural issues that you read about of other countries, but it’s 17 nations -- and some of those structural issues have to be agreed upon in 17 parliaments and then by Brussels.” All fine, except - of course- there are actually 18 members of the eurozone. I guess Dimon forgot that Latvia joined in January (either that, or he thinks Greece left!). Doh! RT @Jeffrey_Black: Jamie #Dimon, prophesying on Europe's dim future, gets the number of euro countries wrong. http://t.co/Xvrdclbaxr 8.08am GMT08:08 Heads-up: our politics liveblogger Andrew Sparrow is tracking all the reaction to yesterday’s autumn statement here: Autumn statement 2014 - reaction: Politics Live blog He’ll be covering George Osborne on the Today Programme (due any moment), and the growing concerns about the scale of cuts in the next parliament: Paul Johnson from IFS' verdict is that cuts will have to be 'gruesome'- will Osborne front up on that? #AutumnStatement Lots of talk about #UK Autumn Statement but stand out for me is planned spending cuts over next 5yrs. Seem implausibly tough. Won’t happen? Asked about Osbo plan to slash spending to 1930s levels of GDP, Ed Balls tells #r4Today: "I'm absolutely not committed to that" 8.05am GMT08:05 Bill Blain, chief fixed income strategist at brokerage firm Mint Partners, reckons that the Governing Council won’t agree any dramatic new policies. He told clients: “Expectations are diminishing for anything spectacular at the this week’s meeting – except kicking that can down the road,” However, that doesn’t rule out fireworks from Mario Draghi in the subsequent press conference (1.30pm GMT). The actual decision on interest rates comes at 12.45pm GMT, but no change is expected -- rates are already at rock-bottom levels, and banks are being charged 0.2% to leave cash with the ECB. 8.00am GMT08:00 European stock markets are inching a little higher at the start of trading, as investors await central bank action this lunchtime. FTSE called to open +10pts at 6735 ahead of BoE + ECB policy updates. Focus on Draghi's hints/commitment (if any) at more stimulus 7.59am GMT07:59 Mario Draghi’s room for maneuver today is limited by the hawkish members of the governing council, who will argue that the current stimulus measures should be given a fair trial. So even though the new ECB staff forecasts on growth and inflation are likely to be disappointing, full-scale QE will probably be resisted. Nick Matthews, an economist at Nomura International Plc in London, predicts: There should be some response to the weaker outlook, and the middle-ground solution might be adding corporate bonds to the asset purchases. That keeps the prospect of quantitative easing alive still. That’s taken from Reuters’ preview. #ECB MT @johnodonnell21 Draghi will speak today but doubt are growing that he can reverse the #euro economic gloom http://t.co/EZaa74L6Ga 7.48am GMT07:48 There’s only a 5% chance of the ECB unveiling a full-blown government bond-buying programme today, says Chris Weston of IG. He also suggests it might announce plans to buy corporate bonds. This would increase the scope of assets the central bank can buy and, in turn, help them achieve a bigger balance sheet. 7.46am GMT07:46 ECB meeting: what the experts predict Credit Agricole reckons the European Central Bank might drop some hints about a future sovereign QE programme at today’s meeting. A formal announcement isn’t expected; instead the ECB might start buying corporate bonds, expanding its current policy of buying asset-backed securities (bundles of debt). They say: “We will be looking at the exact wording of the introductory statement,” “If the reference to sovereign debt purchases appears in the statement, then it would be the clearest sign that the ECB is ready to deliver sooner rather than later, probably with a comfortable majority.” Crédit Agricole: no sovereign QE announcement by the ECB today,but a more formal, albeit conditional commitment to broader asset purchases 7.31am GMT07:31 The Agenda: Will ECB hint at more QE? Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. Coming up today... it’s the European Central Bank’s monthly meeting in Frankfurt today, followed by the usual press conference with president Mario Draghi. With the eurozone economy weak, and inflation at a five-year low of 0.3%, some members of the governing council will be pushing for radical action. They want a full-blown quantitative easing programme, in which the ECB would buy up eurozone government debt. Draghi raised expectations himself last month, saying the ECB would raise inflation and inflation expectations “as fast as possible.” A move to full-blown QE today feels rather unlikely; hawkish members of the Council want to give the latest stimulus moves more time. Draghi could hint at a sovereign bond-buying programme early next year, though, and there might be disappointment if he doesn’t. The ECB will also release its latest staff forecasts for growth and inflation. Also coming up: In the UK, the Bank of England’s monetary policy committee is also meeting, but no change in interest rates is expected. Economists and politicians will also be digesting yesterday’s Autumn Statement, and the prospect of swingeing cuts in the next parliament. My colleague Larry Elliott has peered into the crystal ball, and sees: It is late 2019 and an election is looming. The Conservatives scraped a majority at the last election thanks to a timely boost to the housing market provided by George Osborne, who was rewarded for snatching victory from the jaws of defeat by succeeding David Cameron as prime minister. Osborne sits impassively in the Commons as his chancellor of the exchequer uses the last autumn statement of the 2015-20 parliament to boast that the government has met its manifesto pledge of balancing the books. So what does Britain look like in these circumstances? In terms of the size of the state, it is like the Britain of the 1930s. Public spending has fallen to below 35%, lower than the postwar low under Macmillan in the late 1950s and back to the pre-welfare-state years when Neville Chamberlain was starting a rearmament programme. Osborne is offering a return to the world of Ukip’s dreams without the need to vote for Nigel Farage.... Autumn statement 2014: Osborne moves to cut spending to 1930s levels Autumn Statement hangover as scale of coming spending cuts is considered. ECB ahead (will Draghi make hints or promises?). MPC snooze. I’ll be tracking all the main events of the day.... Updated at 7.33am GMT |