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ECB bond buying on STOCK.com


March 6 2015, 10.55am GMT


European Indices are volatile on Friday’s trading as the ECB announce Monday as the start of the €1.1 trillion bond-buying programme.

Having fallen at the start of the week, European equities found ground on Wednesday and climbed beyond previous levels. Germany30 [DAX] is up from Wednesday’s mark by 2.9%, whilst France40 [CAC] has risen 2.2% since mid-week.

President of the ECB, Mario Draghi met with other European Central Bank members on Thursday in Nicosia, Cyprus, where the bank’s delegates agreed on a start date for what Draghi called the ECB’s “final set of measures”.

In his upbeat account of the quantitative easing programme in his introductory statement on Thursday, he said, “Following up on our decisions of 22 January 2015, we will, on 9 March 2015, start purchasing euro-denominated public sector securities in the secondary market. We will also continue purchasing asset-backed securities and covered bonds, which we started last year. As previously stated, the combined monthly purchases of public and private sector securities will amount to €60 billion. They are intended to be carried out until the end of September 2016 and will, in any case, be conducted until we see a sustained adjustment in the path of inflation which is consistent with our aim of achieving inflation rates below, but close to, 2% over the medium term.”

The 2% key rate has not been seen since 2012. Draghi reviewed the positive effects from the banks’ monetary policy decisions to date: “Financial market conditions and the cost of external finance for the private economy have eased further, also following our previous monetary policy measures. In particular, borrowing conditions for firms and households have improved considerably. Moreover, money and credit dynamics have been firming.”

Whilst the euro has fallen against most major currencies, businesses have surely seen the benefit, a fact that is reflected in index gains; Thursday saw the highest mark recorded on MT4 platform to date for Germany30 at 11533.

The Greece Question

Draghi also answered a question regarding Greece and ECB willingness to extend further emergency liquidity assistance. Draghi’s response was to say that “yes, we’ve raised ELA today. That’s what the Governing Council has decided, by €500 million. As I said the ECB is a rules-based institution. From this viewpoint, the decision about lifting the waiver, as well as the decision not to allow monetary financing, and finally the decision about determining an ELA, are all the outcome of rules, not our political decisions.” However, he also noted that, “the ECB has already lent – not liquidity – just lent 100 billion euros. And I repeat, it’s 68% of Greece’s GDP, and it’s the highest in the whole euro zone. And it has doubled this amount in the last two months. So the last thing one can say is that the ECB is not supporting Greece.”

Greece20 index started to plummet on 23 January, a day after the ECB announced the bond buying scheme, and though the index has fluctuated on a downward trend for over a month, on Wednesday the price started to rise again with gains of 4.8% over 2 days.

MT4 Chart: Germany40 [DAX]

Germany40 DAX on STOCK.com

MT4 Chart: France30 [CAC]

France30 CAC on stock.com

MT4 Chart: Greece 20 [FTSE ATHEX20]

Greece20 on STOCK.com

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