Stocks Slip Following EIB Comments no Lending
European stock markets resumed their decline today. Markets initially tried to move higher after mixed signals from Asia, but what looked like a buy into dips quickly was over and markets resumed the decline as U.S. stock futures also headed south. Only the FTSE 100 managed to hang on to slightly gains, helped by a weaker pound, but is also down from earlier highs. The DAX is holding near 13000 so far, but is down on the day.
The EIB May Face Reduction in Lending Volume
The European Investment Bank may face reduction in lending volume due to Brexit. The President of the European Investment Bank (EIB) Hoyer warned in an interview with Boersen-Zeitung that if other EU member states don’t replace the U.K.’s capital share of 16% the maximum lending capacity of the bank could fall by as much as EUR 100 bln. Hoyer said, however, that a cash infusion is not needed and that it would be sufficient to transfer a small part of the bank reserves will be transferred to equity.
Constancio says that the ECB must be patient and persistent, adding that while the Eurozone recovery is broad based, resilient and robust, an “ample degree of monetary stimulus” is still needed. Constancio also repeated that financial stability risks “seem contained” thus rejecting concerns that the persistent low interest environment is fueling imbalances and risks.
Fed’s Bullard said he thinks the current rate is about right, speaking in a Wharton Business Radio interview. He is concerned the Fed could “send the wrong signal in December by raising the policy rate, and that depresses inflation expectations.” He added, though, that he’s “willing to go with the data, and growth prospects have been better this fall.” Yet he doesn’t expect inflation to be picking up. Meanwhile, data and Fedspeak have the market pricing in a 25 bp tightening next month. He did note that the regulatory environment is very different under the Trump administration, and that’s given business people more confidence.
The BOJ’s Kuroda has made it clear that the BOJ will continue to pursue Quantitative and Qualitative Easing (QQE) and Interest Rate Targeting even as the inflation target continues to be pushed out in time. The Bank of England and the Bank of Canada previously raised interest rates but left little doubt in investors’ minds that there is no urgency to do so again in the coming months.