Thanks to really terrible economic numbers out of France and Italy it was easy for troubles at one Portuguese bank to revive fears about slumping economic growth for pretty much every EuroZone country outside of Germany. For France industrial output fell 1.7% in May from April. In Italy industrial output dropped 1.2%
Draghi’s moves today amount to a bet that if you throw enough cash at banks—and charge them for keeping it on the sidelines—they’ll rev up their lending machines.
The rally in U.S. Treasuries keeps on keepin’ on. But all indications are that the Treasury rally is built on the relative attractiveness of Treasuries rather than on a forecast of falling U.S. economic growth. At least that’s what the mix of stronger Treasury prices plus a steady market for stocks argues to me.
At its meeting yesterday the European Central Bank didn’t take any action on slow economic growth in the EuroZone or on an inflation rate so low that it threatens to turn into deflation. But, said bank president Mario Draghi, the ECB is “comfortable with acting next time.”
The consensus after the bank’s meeting today seems to be that unless inflation picks up in April the bank will be forced to move. The European Central Bank next meets on interest rates and monetary policy on May 8.
Now that EuroZone finance ministers have finally approved the next payout to Greece, it looks like the Greek crisis is about to be replaced by the French crisis with an Italian crisis just offstage—and a renewal of the Greek crisis quite possible this summer.
Monday’s inflation data from the EuroZone was even worse than expected. The year over year inflation rate fell to 0.5% in March, the lowest level in four years and below the 0.6% rate expected by most economists. The low inflation rate has increased fears that the EuroZone is headed toward deflation
