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ECB’s Draghi disappoints markets

Despite signalling that the ECB was ready to assist peripheral eurozone economies by stepping into the sovereign bond markets, investors were evidently disappointed today by President Mario Draghi’s press conference. Many had anticipated the announcement of some decisive action, following last week’s tough statement indicating that the ECB would “do whatever it takes to save the euro… and believe me it will be enough”. Markets were duly disappointed by the lack of tangible action and comments that suggested the ECB couldn’t solve all of the eurozone’s problems; the difficult decisions would have to be taken by the politicians of the region’s governments. Whilst there were some concessions in that the ECB may forgo the seniority over existing bond holders that they previously enforced, there was a reiteration that Germany’s Bundesbank is opposed to bond buying programs, highlighting the difficult position the ECB finds itself in.

The market’s reaction was unanimous, with stock indices initially up around 0.5% going into the conference; many European Bourses were a few percentage points lower by its conclusion. The FTSE 100 had traded up to ca. 5760, before plummeting around 100 points to the 5660 level. The decline was led by financials and miners, unsurprising given their rally into today’s event. UK’s blue-chip stocks closed the day down 0.9% at 5662, outperforming the German DAX and French CAC that were both down more than 2%.

This was posted in Bdaily's Members' News section by James .