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ECB disappoints everyone

Published Friday, October 3rd, 2014

Mario Draghi disappointed everyone yesterday. He disappointed those banking on a big dose of non-conventional monetary measures with a lack of detail and size. He disappointed those who hate the idea of the ECB buying asset backed securities by continuing to commit to a programme of purchases. The latter group see such a programme as a bail-out under another name, as illegitimate and as turning the ECB into a bad bank.

The President of the ECB is in an impossible position. The core of the eurozone is split and he admitted yesterday that “things are not going well with some countries in a recession that never ends”. European stock markets responded with the steepest one day fall in 15 months. US stock markets dipped but recovered in wait for today’s non-farm payroll number expected to come in at around 215,000.

Oil prices took another lurch downwards to $91.55/bbl (-2.61) on Brent and $88.18/bbl on WTI (-2.55) but both recovered significantly to close at $93.42/bbl (-74) and $91.01/bbl (+28). On an intra-day basis Brent has hit the -20% bear market criteria but not on a closing basis. The levels that officially mark 20% down from the highs are $92.52/bbl on Brent and $86.18/bbl on WTI. The closing WTI/Brent arb at -$2.41 is the highest achieved since September last year.

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Posted by David Hufton