ECB Extends and Tapers Disappointing Markets

The Euro whipsawed and stocks moved higher as the ECB announced that it would extended the asset purchase program by 6-months from March, but taper the monthly purchases from 80 billion Euros per month to 60 billion Euros per month.  The news likely reflects the need for normalization as the European economy improved. The benchmark interest rates were left unchanged. Asset purchases until March 2017 will remain at 80 billion per month.  This was a slight surprise to the markets as most did not believe a taper was in the cards.

Monte Paschi struggling to raise capital post referendum. Banca Monte dei Paschi di Siena SpA has asked the ECB to extend the deadline to raise the additional EUR 5 billion capital increase it needs to avoid a state bailout, which under the new rules will impose losses on both shareholders and bondholders. The bank said in a statement late yesterday that it wants the ECB to extend the deadline from the end of the year to January 20 due to the changed reference context following the referendum result and Renzi’s resignation.

The Bank of France business confidence improved to 101 in November, from 99 in the previous month. A better than expected reading and with the production outlook for December rising to 9 from 5 in November, and the Bank of France left its growth forecast for Q4 unchanged at 0.4% quarter over quarter.