FOREX - Trends, forecasts and implications - page 301
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ECB: Financial market sentiment optimistic but contrasted with weak economy -2-
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FRANKFURT, Nov 27. (Dow Jones). The European Central Bank on Thursday issued a certificate to the eurozone financial system confirming it is as healthy as it has never been since the financial crisis began seven years ago. However, the ECB warned that the "generally optimistic" mood in the financial market masks weakness in the economy.
Systemic stress in eurozone markets "is at its lowest level since the financial crisis began in 2007, despite occasional signs of financial market turbulence", the ECB said in its biannual Financial Stability Report.
The ECB praised the banks' efforts to improve their balance sheets.
However, "overall optimistic sentiment in the financial market contrasts with the weakness, fragility and unevenness of the economic recovery, despite progress in easing bank and state vulnerabilities," the ECB report said.
Risks remain from low bank profitability and any reversal in the direction of the search for yields in the global market, the ECB warned. Another risk is unhedged debt amid sluggish economic growth and uncertainties over the willingness of member state authorities to implement economic and fiscal reforms.
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"The growth outlook is not too bright," ECB Vice President Vitor Constanciu said at a press conference.
He said a modelling analysis of European companies' conventional bonds did not point to an overvaluation of these assets. In the European securities market "we don't see overvaluation either," he said. However, there are some signs of increased demand in the market for high-yield bonds and convertible bonds (CoCos) issued by banks.
Constanciu said he believes financial markets will be able to weather any volatility that could result from heightened expectations of monetary tightening in the US, although emerging markets may be more vulnerable to the impact of higher US interest rates, which analysts expect to start next year.
Central banks have contributed to the reduction to extremely low levels of rates on government bonds and many private sector securities, prompting investors to seek higher-yielding assets. Central banks in the US, UK, Eurozone and Japan have kept key rates near zero. In addition, the Federal Reserve, the Bank of England and the Bank of Japan have been buying government bonds in large amounts to lower long-term interest rates. This programme is known as quantitative easing.
The ECB, which until recently has largely resisted and stayed the course, has recently started buying asset-backed securities of banks as part of the programmes announced in September. Speaking on Wednesday, Constanciu signalled that the ECB could consider buying government bonds in the 1st quarter of 2015 if its leaders deem that current measures are not sufficient to boost the central bank's balance sheet and raise inflation.
The ECB's very loose monetary policy is justified by low nominal GDP growth, Constanciu said. The ECB's job is to watch "not asset prices" but the prices of goods and services, he noted. Annual consumer price inflation stood at 0.4% in October, well below the ECB's target of just under 2%.
The possible risks associated with the ECB's active measures should be managed through regulatory mechanisms, i.e. macro-prudential policy, he said.
-Author Brian Blackstone; PRIME translation; +7 495 974 7664; dowjonesteam @ 1prime.biz.
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Dow Jones Newswires, PRIME
EUROPE IS HEALTHY IT TURNS OUT)))
hour sticks on the moon
working out the pips in pips:
I've got a buy from 91,995... just on that bottom.
GBPJPY in the making, very promising...
Hold the levels on the loonie
Hold the levels on the moon
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waiting for the knives...
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waiting for the knives...
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Look at the pound.
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the expectation, you know.
and here's the euro pound curriculum:
above, it's all justified...
the expectation, you know.
and here's the euro pound curriculum:
There's an uptrend there-maybe it's hanging right. You have a buy, I have a sell higher - it's called pair trading!
Just why look for a pick up at the top of the trading range?