Author Archives: Olivier Desbarres

ECB wins first battle but long war ahead

It could only be a chart on the ECB’s announced QE program and hopefully the table below clarifies who will be buying what kinds of assets and in what size.

The initial market reaction – a fall in eurozone yields and euro and a jump in equities – suggests that the announcement has surpassed expectations – expectations which had admittedly been massaged over recent weeks. Read more

Draghi, get to the chopper

In the 1987 hit movie Predator, Major “Dutch” Schaefer, played by muscle man Arnold Schwarzenegger, orders his team-member to “get to the chopper” to escape the jungle creature. Markets now expect European Central Bank President Mario Draghi on 22 January to flex his monetary muscles and save the day by jumping into his metaphorical helicopter and throwing huge amounts of cash at the Eurozone’s problems. Read more

Crude Expectations

The dramatic 55% fall in crude oil prices in the past year has brought clear benefits to oil importing nations, which include the US and most of the European Union (bar Norway) and Asia (bar Malaysia). Governments have been able to cut oil subsidies (e.g India, Indonesia and Egypt) and alleviate fiscal pressure, energy-intensive manufacturers’ input costs have shrunk and consumers are enjoying a tandem fall in petrol pump prices and heating bills. Read more

European Central Bank QE: A little late to the party

The ECB meets on 22 January and with Eurozone inflation having turned negative and growth stalling, there is a high probability it will announce a fully-fledged bond buying program. Its immediate goal will be to cap peripheral bond yields and systemic risk ahead of Greek elections on 25 January. Ultimately it will be tasked with staving off deflation and generating jobs – a tall ask for a measure of last resort which by definition has its limitations. Its effectiveness will depend on its size – likely to be around €1 trn – and modalities but will be curtailed by its late timing. For EUR/USD it likely means further downside in coming months, in my view. Read more

What to look out for and expect in 2015

2014 was a year of two halves, at the risk of sounding clichéd. It started well, with equities fuelled by low global interest rates and market volatility. It then turned sour mid-year. Talk of US policy tightening and concerns about global growth’s underpinnings – exaggerated in my view – allied to mounting geopolitical tensions in Russia and the Middle East led to far more volatile markets (The global growth story – cause for concern, not panic). Equities and oil prices collapsed although the former has staged a late-year rally. Read more

The global growth story – cause for concern, not panic

Tandem fall in equities and oil

Equities have tanked in the past fortnight. While the US Dow Jones is still up about 4.7% year-to-date, global equities are down 1-2%. Eurostoxx 50, emerging markets and the FTSE 100 are down about 1%, 7% and 8.5% respectively (in local currency terms). There are arguably multiple causes to the equity slump and greater volatility since mid-year, including the backdrop of global conflicts (Russia-Ukraine, Syria etc…). In the UK, very uncertain general elections in five months time have not helped either (as I discussed in Labour still ahead of Conservatives but UKIP is potential kingmaker). Read more

Bank of England tempers rate hike scaremongering

A vocal lobby has for a while argued that ultra low rates in the UK (and worldwide) have penalised conscientious savers, forced them into riskier investments and fuelled property prices. Now a Bank of England (BoE) report has got some of the press, and politicians across the political spectrum, hot and bothered about the impact of BoE rate hikes on households’ spending and debt-servicing ability. Read more

Referendums and EU exit: tools, not end-goals, which lack credibility

Prime Minister Cameron’s promise of a referendum on EU membership in 2017 served a potential dual purpose, in my view: to leverage concessions on the UK’s terms and conditions of EU membership, including immigration, and domestically to regain the initiative with the anti-EU lobby. Ultimately, the government failed to legislate (before the May elections) an in-out EU referendum, after a breakdown in negotiations with the Liberal Democrats. While the Conservatives could table a new bill to hold a referendum if they win the May elections, it is not obvious how much Cameron has achieved. Read more

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