When you can't act, you talk. Sure enough, here we go again:
- DRAGHI SAYS ECB WILL DO WHATEVER NEEDED TO PRESERVE THE EURO
- DRAGHI SAYS THE EURO IS IRREVERSIBLE
- DRAGHI SAYS YIELD DISRUPTING POLICY TRANSMISSION ARE IN ECB REMIT
- DRAGHI SAYS SHARING SOVEREIGNTY ON EU LEVEL TO COME
- DRAGHI SAYS LAST EU SUMMIT WAS MOMENT OF RECOGNITION
And of course the weak hands cover until they realize Draghi just said absolutely nothing, as at this point everything is in Germany's hands. And not only has Germany not said anything, and won't until September when the constitutional court will approve or deny the ESM, but in fact they have been saying overnight that Spanish bonds are not eligible for EFSF purchases. In the meantime, Europe has devolved from a continent of coordinated action to coordinated jawboning.
Take home: poor Draghi can't even afford Hilsenrath and has to force EURUSD squeezes himself. Because both he and Bernanke know that all they can do is talk the markets up. Any actual event is now grounds for selling the news.
In the meantime, here is the market reaction in a world in which nothing matters any more except what hollow words comes out of broke central planners' mouths:
- S&P futures spik, now up 6.6pts (or 0.5%) after being down 6pts just before Draghi pledged ECB will do whatever needed to preserve euro.
- Dow futures up 56 or 0.4%, Nasdaq up 10 or 0.4%
- Italian stocks up 2%, Spain up 1.3%, DAX uup 0.4%, CAC up 1.1%
- Euro spikes to 1.2180, NY oil trims drop to 15c or 0.2% (was down 90c or 1%), NY gold unchanged at $1,612/oz (had been down $7.80 or 0.5% at $1,604)
- 10-yr Treasury yield rises to 1.42%
A quick Reuiters summary of what was said:
European Central Bank President Mario Draghi pledged on Thursday to do whatever was necessary to protect the euro zone from collapse, including fighting unreasonably high government borrowing costs.
"Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough," he told an investment conference in London.
"To the extent that the size of the sovereign premia (borrowing costs) hamper the functioning of the monetary policy transmission channels, they come within our mandate."
The euro rose and German bond futures turned negative after the comments.