The near-zero interest rates favor short-term production schedules with minimal capital requirements, resulting in low-risk production lines of cheap goods. That’s why we have “pound- shops” and 99p shops and all the other shabby outlets that now litter every suburban high street - creating the illusion of zero inflation.
"Picking winners" was never a good idea for policymakers - no matter what the economics textbooks say - and now the 'market' has given the ECB a big headache. Draghi's corporate-bond-buying scheme has backfired as the European Central Bank finds itself holding junk bonds in its so-called 'stimulus' plan after K+S AG was downgraded by S&P (sending its price plunging).
Asian stocks and S&P futures fall modestly and European shares are little changed as traders digested the surprising reticence from yesterday's ECB meeting. The dollar jumped to 7 month highs, pressuring EM currencies and pushing the euro to its weakest level since March and below the Brexit lows, after Mario Draghi shut down talk of tapering, while the Yuan dropped to the lowest since 2010.
Global stocks were modestly higher, before the European Central Bank gives its policy update, while investors weigh mixed earnings results. Asian stocks rise, U.S. equity-index futures are little changed. The euro touched its weakest level since July and stocks in the region fell after their first back-to-back gains in two weeks.
In a surprising reminder how the European central bank feels about bitcoin and other virtual money, the ECB urged EU lawmakers to tighten proposed new rules on digital currencies such as bitcoin, fearing they might one day weaken its own control over money supply in the euro zone.In other words, first the ECB went after cash; now it is going after all virtual currencies like bitcoin.
US futures were little changed, with European shares lower, and Asian stocks higher as caution returned after last night's Chinese economic data did little to clear up how the world's second largest economy is performing, and provided few positives for investors ahead of the third and final U.S. presidential debate; imminent announcements from both the ECB and the Fed also will keep traders on their toes today.
Gold remains the asset Wall Street loves to hate. It is currently under pressure due to the recent increase in rate hike odds and there was definitely a need for stale long positions to be cleared out. When we see the mainstream gang up on gold so quickly though, we tend doubt that the bears will be correct. Of course we have no crystal ball either, but we remain convinced that the monetary experiments of recent years will end quite badly.
World stocks started the week in the red Monday as the dollar touched a 7-month high and U.S. and European government bond yields climbed to their highest since June following the Friday speeches by Eric Rosengren and Janet Yellen which hinted the Fed's next step could be to pursue a steepening of the TSY yield curve the same as the BOJ.
Deutsche Bank's finance chief told his staff that job cuts at the bank could be double that planned, a step that could remove 10,000 further employees. If 10,000 job losses were ultimately to follow the 9,000 announced by management in October 2015, roughly one in five of the bank's workforce around the globe would be affected.
French Prime Minister Manuel Valls, wants to transform the EU into the United States of Europe, complete with its own European defense force. “Member states have a choice: give up on the EU or transform it,” writes Manuel Valls.