ECB’s Coeure Says Low Inflation May Warrant More Stimulus.
MILAN: Italy sold six-month bills at an average negative yield for the first time on Wednesday as the prospect of further monetary easing in the euro zone pushed investors to pay to hold Italian debt.The first signs of further euro weakness will come from any strengthening of inverse correlation between euro/dollar and European equities, as the common currency settles into a humdrum range after a sharp decline following European Central Bank President Mario Draghi’s fresh stimulus comments, Bloomberg strategist Vassilis Karamanis writes.LONG-TERM INTEREST RATES FALL AGAIN ON WORLD ECONOMY CONCERNS – Ireland’s long-term interest rates are falling again, as part of an international move reflecting concerns about the outlook for the world economy.
Italy sold 6 billion euros ($6.6 billion) in bills due in April 2016 at a yield of minus 0.055 per cent, down from a 0.023 per cent yield paid a month ago on the same maturity. Real money investors (pension funds, asset managers, insurance companies among others) could be a catalyst for euro to test technical support near 1.08 versus the dollar, rather than the U.S. The risks have increased that inflation will remain below the ECB’s goal of close to 2 percent and that warrants vigilance from policy makers, Coeure said in a speech in Mexico City on Tuesday. That is good news for stock investors, who can see both rising corporate profits and continued central-bank policy that pushes buyers toward riskier assets. “The economy is not stellar but it’s OK. That is a good middle ground for the market,” said Tom Clarke, a multiasset portfolio manager at William Blair & Co., which has more than $77 billion in client assets.
With the Federal Open Market Committee meeting ending today, Chair Janet Yellen isn’t expected to hugely deviate from her recent rhetoric, and will probably maintain possibility of a liftoff in 2015. The bank showed on the official website that the new series of the 20-euro banknotes will carry a completely new security feature – a transparent portrait window on the right of the note on the hologram strip. All eyes this evening will be on the US Federal Reserve Board, whose latest policy statement is likely to focus on the fact that interest rates will stay low for a prolonged period, even if US base rates start to edge up either late this year or, more likely, early in 2016. Shares in the eurozone have rebounded sharply from their heavy declines in August, helped by a strong hint last week from ECB chief Mario Draghi that the central bank is considering expanding its bond-buying stimulus program later in the year, or pushing interest rates further into negative territory. A more dovish than expected announcement could see the dollar paring even more gains and test 1.1242, the fifty percent retreat of its latest rally versus the euro.
ECB President Mario Draghi said on Thursday that policy makers would reexamine the scope of their quantitative-easing plan in December in light of new economic forecasts. Some investors say the moves could foreshadow a rerun of the first quarter of the year, when the launch of the central bank’s massive bond-buying program helped drive European indexes to record highs.
ECB’s Draghi won’t reveal his stimulus cards until at least the next ECB meeting, which is five weeks away; that means monetary policy divergence theme won’t change for some time. Investors quickly interpreted that to mean the ECB would expand its quantitative easing programme, its programme of bond-buying which is keeping market interest rates at historic lows.
If the correlation between stocks and euro gets stronger, it could mean real money names are hedging fresh European equity holdings and re-entering euro carry trades. US IMPORT BLACK MONDAY WILL BOOST RETAIL SALES – BUT AT A COST – There’s an argument for saying that we, as a nation, are becoming more Americanised year by year, with Black Friday the latest shopping phenomenon to reach the island. Renowned globally as the day Americans see red in the search of bargains, the 24 hours after Thanksgiving is quickly becoming an Irish day of sales akin to St Stephen’s day.
According to new research carried out by e-commerce partner, Webloyalty, and retail research experts, Conlumino, it is expected that Irish people will spend €109m this Black Friday. The expected spend for the shopping day, which takes place on November 27, would see its value increase by 31% year on year, writes the Irish Independent.
With the day of discounts looming, the latest sales figures from the Central Statistics Office have shown a slowdown in both the volume and value of retail sales. Efforts by the ECB to reflate growth in the 19-nation region haven’t fixed economic problems, Governing Council member Ilmars Rimsevics said at a conference in Riga on Wednesday. All four traders, who asked not to be named as they are not authorized to speak to the public, said interbank and leveraged names have already bought dollars in large amounts and aren’t seen adding at current levels.
While the figures are showing a decline in retail sales month on month, they are still significantly higher when compared with the same period last year. Excess liquidity created by refinancing loans and large-scale asset purchases has remained in the banking system and hasn’t reached companies and households, he said. The ECB’s ongoing struggle to push inflation back toward its 2% target means stock market-friendly stimulus measures will be around for longer. “The inflation numbers have given Draghi the ammunition to push for further easing, but we aren’t too concerned about deflation.
In response to an audience question, Coeure said the ECB isn’t in a “tit for tat” where it would need to adjust interest rates in response to a Federal Reserve increase. Draghi is saying the right things,” said Colin Graham, chief investment officer for multiasset investing at BNP Paribas Investment Partners, BNPQY -0.66 % which manages €532 billion ($588 billion) of assets. PROFITS AT McAFEE’S IRISH ARM RISE 7% TO €25m – Pre-tax profits at the main Irish unit of US security software developer McAfee increased last year by 7% to €25m. Carney argued that borrowers should be preparing themselves for a rate rise that was a “possibility,” although he added “not a certainty.” Back in July, he told a parliamentary committee that “the point at which interest rates rise is getting closer.” He has been wheeling out the same remarks every few weeks for the last couple of years. The accounts show that McAfee, which has its head office for its Europe, Middle East and Africa operations in Cork, increased its payroll numbers last year to 338 people from 332 a year earlier, says the Irish Examiner.
That leaves many investors with nowhere to go but the stock market, according to Neil Dwane, global strategist at Allianz Global Investors, which oversees €412 billion. “If you are looking for a return, you either have to take your money outside of Europe, or buy equities. THOUSANDS OF IDENTITIES UP FOR SALE ON THE DARK WEB – Personal details of more than 600,000 customers were stolen from companies in the UK in 2014, laying bare the extent of digital weaknesses in British business in the run up to last week’s TalkTalk cyber attack.
In the latest quarter, growth has slowed a little, but at 0.5% over three months it is still respectable by any historic standards for a mature, not-very-exciting economy such as Britain. A set of British personal details, including all the bank account information necessary to steal money, is currently available on the web for $30 on average, depending on how wealthy the individual is, according to one Whitehall security official, says the Financial Times. Profiles hacked from the “government gateway” database – which contains information shared by key departments such as HM Revenue and Customs and the Department for Work and Pensions – have been recently available for sale at $75, they added, saying that the data sets were the “crown jewels” of identity theft.
A government spokesperson said it had invested more than £860m in cyber security and had a number of “very effective” schemes with which to engage business. “We are looking carefully at the level of regulation. While the ECB is still aggressively trying to pump up its economy with cheaper money, it is going to be very hard for any other major central bank to raise rates at all. The exchange rate has hardly budged, equity prices are actually down a bit on their levels of the spring, and — Spain and Ireland aside — the property market remains subdued.