A Dovish Draghi is Good for Riskier Asset Prices

European stock markets are mostly slightly down, with the DAX swinging between gains and losses as the EUR hovers around the 1.18 mark against the USD. The FTSE 100 is underperforming slightly, initially weighed down by a stronger pound, although the currency pared some of its earlier losses after comments from Brexit Secretary Davis suggesting an ongoing standoff in talks with the EU. MIB and IBEX have suffered most from the fresh bout of caution in stock markets. Risk appetite still held up in Asian and the Nikkei closed with a gain of 0.20%. The Hang Seng outperformed with banks underpinned by optimism over new shareholding rules.

ECB’s Draghi Say Inflation is not yet self-sustained.

Draghi admitted that the “robust recovery” means the economy “may be becoming more resilient to new shocks”, but stressed that “we still need a patient and persistent approach to monetary policy to ensure that medium-term price stability is achieved”. The ECB President argued that while “we see inflation moving steadily away from the very low levels of recent years”, “progress remains incomplete and partial”, although “as the labour market tightens and uncertainty falls, the relationship between slack and wage growth should begin reasserting itself”. Pretty much a defense of the decision to extend the QE program once again, although with the increasingly optimistic outlook another extension beyond September next year seems very unlikely even if the ECB remains reluctant to commit to an end date for net asset purchases.

If appears that job losses are following gains in Canada. Canada’s ADP employment fell 5.7k in October after a 43.0k gain in September. Construction jobs fell 7.2k, natural resources contracted 8.2k and trade/transportation and utilities were off 9.8k. This is the debut of the ADP estimates for Canada. The survey runs counter to Statistics Canada’s report which revealed a 35.3k gain in October after the 10.0k rise in September.

Exports are driving growth in the Eurozone. The Eurozone current account surplus widened in September. The Eurozone posted a current account surplus of EUR 37.8 billion in September, up from EUR 34.5 billion in the previous month, leaving the 3 months rate on an upward trend as the goods surplus continues to widen. This is consistent with indications that net exports underpinned overall growth in the third quarter of the year.