Welcome back to December! Remember when the financial markets thought the Federal Reserve was going to raise interest rates three times or maybe even four times in 2016 and suddenly bank stocks were the thing to own? At least until January when the sector went into a dumpster. Well, the positioning was back today–even if just for a day
Step aside global central banks.It’s time for the pattern called risk-on/risk off to set the direction of global financial markets again. That’s where we are today now that markets have decided that programs of quantitative easing from central banks–the Federal Reserve, the Bank of Japan, and the European Central Bank–aren’t enough to drive economies or financial markets anymore
It’s central banks to the front today–but you really need an inside-bank scorecard to understand why markets have reacted as they have to the news/rumors out of the Bank of Japan and the People’s Bank of China this morning.
Yesterday, financial markets fell as traders and investors decided that the policy changes–another 10 basis point cut to deposit rates and an increase of 10 billion euros a month in asset purchases–weren’t enough, especially in the face of lower forecasts for inflation and economic growth from the central bank. Today, financial markets seem to have decided that they’re reason to rally.
The longer the financial markets thought about the actions announced by the European Central Bank today, the less impressed markets were. The STOXX 600 Europe Index had climbed as much as 2.5% during the day, but after peaking around 1 p.m., the index finished down 1.7% for the day.
After being disappointed in December when the European Central Bank delivered only the minim expected, financial markets are going into tomorrow, March 10, positioned for another disappointment from Mario Draghi and the EuroZone central bank.
Today the People’s Bank, China’s central bank, cut the reserve ratio requirements for the country’s banks to 17% from 17.5%. The move will inject about 685 billion yuan ($105 billion) into the financial system
