Source: CNBC
For nearly an hour on Thursday afternoon it was all going so well.
The European Central Bank (ECB) announced a better-than-expected range of stimulus measures aimed at rescuing a fragile recovery in the region and pumping inflation back up to desired levels. Asset markets cheered the news, with financial stocks leading the charge higher as the euro slipped lower on the anticipation of extra liquidity.
But the rally faded in the same amount of time that it took to start. The pan-European Stoxx 600 index finished the day 1.7 percent lower after being up over 2 percent at one stage in the afternoon.
Fickle financial markets had once again proven
how volatile they can be. While this might not be a major headache for
President Mario Draghi, who could still provide a bandaid for the real
euro zone economy, it underlines the concerns and doubts that investors
have over central bank policy amid an environment of low inflation.
A continued slide in equity prices - led lower by oil - will also provide little help for business confidence and capital expenditure in the bloc.
"I certainly don't think the ECB will be over-delighted to see the euro up above $1.11 in the immediate aftermath of the press conference," Howard Archer, an economist at IHS Global Insight, told CNBC via email.
Sentiment shifted during Draghi's usual press conference when he indicated interest rates are unlikely to go any lower, even if he did make a proviso that that could change if any new hurdles materialized.
A continued slide in equity prices - led lower by oil - will also provide little help for business confidence and capital expenditure in the bloc.
"I certainly don't think the ECB will be over-delighted to see the euro up above $1.11 in the immediate aftermath of the press conference," Howard Archer, an economist at IHS Global Insight, told CNBC via email.
Sentiment shifted during Draghi's usual press conference when he indicated interest rates are unlikely to go any lower, even if he did make a proviso that that could change if any new hurdles materialized.
Compounding the move lower for equities were the
global oil benchmarks which have been tightly linked to stocks since
last year. While Draghi was still speaking, a report from Reuters said
that a meeting between oil producers to talk about a production freeze
on production was unlikely to take place in Russia this month. Brent
crude slipped some 2 percent to $40.20 a barrel by the end of the
European session.
"The market has reacted to the oil price falling below $40 a barrel, meaning the brief spike on the back of 'Draghinomics' lasted a matter of minutes," Hargreaves Lansdown Senior Analyst, Laith Khalaf, told CNBC via email.
He added, however, that the ECB would probably be more concerned about the effects on the real economy. Although the Frankfurt-based organization might fall short there too with many analysts already questioning this latest round of stimulus.
"The market has reacted to the oil price falling below $40 a barrel, meaning the brief spike on the back of 'Draghinomics' lasted a matter of minutes," Hargreaves Lansdown Senior Analyst, Laith Khalaf, told CNBC via email.
He added, however, that the ECB would probably be more concerned about the effects on the real economy. Although the Frankfurt-based organization might fall short there too with many analysts already questioning this latest round of stimulus.
Jonathan Loynes, the chief European economist at Capital Economics, believes that the central bank "can't work miracles" and said in a note that it is far from certain that Draghi's latest "bazooka" will be any more effective than previous ones in securing sustained growth and eliminating the threat of deflation.
Marc Ostwald, a strategist at ADM Investor Services, criticized the ECB's announcement of four targeted longer-term refinancing operations (TLTROs) for euro zone lenders.
He said it may prove to be nothing more than a "glorified Ponzi scheme - noble in its intentions, but ultimately lacking the requisite bite."
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