ECB flattened by the moving train
The ECB came out yesterday, but frankly it was too little and too late for markets. Its moves on liquidity and bond buying were not the cause of the global sell-off in markets, but nevertheless the fact that it was only buying Irish and Portuguese debt selectively did not inspure confidence. The sell-off in equities was the biggerst one-day fall since December 2008. Currently, Asian stock markets are 3% to 5% softer. In the US, yields on Treasuries have plummeted, down nearly 40bp this week, which is the biggest weekly decline since December 2008. In FX, EUR/CHF has achieved a new lifetime low, which means that Wednesday's action on rates has hardly put a dent in the downmove. Actual intervention remains a risk, but the state of the ECB's balance sheet (which it has said "...is no longer assured to the same extent.") acts as a hinderence, as does the fact that it is probably all too aware it will be a futile gesture. Given the extreme nervousness in markets at this point in time, the US employment report later today will take on even greater significance. Markets are looking for an 85k gain, after the 18k gain seen in June. |
