The past week had a great impact on the stock exchanges markets, especially European ones. We have seen in fact, the failure of the constitutional referendum in Italy with the resignation of the President Matteo Renzi while Mario Draghi confirmed the QE plan, leaving the rate unchanged at 0%.
European Central Bank decided to extend the QE until December 2017, but the next April the monthly amount of purchased assets will be reduced from 80 to 60 billion euro.
Subsequently the BCE published the new estimate on growth and inflation. The deposit rates are still at -0.40%.
It seems that on spring will come the long-awaited Tapering (gradual reduction of bonds purchased by a Central Bank), although Mario Draghi made it clear that they have not discussed exactly about that, but the ECB will continue to be actively present on the bond markets.
Earlier this week, the euro-dollar exchange rate had climbed more than 3 cents, and on confirmation of interest rates was able to get back even above the 1,08 level, after reaching its annual low of 1,050 after Italian referendum. It was the longest rally of the past two months for European shares.
However, it only took 2 hours to absorb almost completely the weekly rise and return to the EUR / USD levels of last Thursday, apparently putting an end to the brief pro-euro.
Immediately after Italian referendum, MPS fell and the differential between BTP/BUND opened with a jump to 170 points and then closed the session at 166.70
Moody’s decided to cut the outlook of Italy to negative from stable, on the basis of the outcome of the referendum and now government crisis.
Moody’s believes that Italy will be more exposed to the risk of sudden shocks due to the deterioration of the fiscal position of the country.
Over the weekend the President of Italian Republic has met all the major party leaders to discuss the fate of the country. On Sunday came the news that new Premier will be Paolo Gentiloni. We will see how the stock markets will react at the opening on Monday.
Analysts are going crazy with the comments of the web: among hypothesis exit of Italy from the Euro zone and the most dreaded arrival of the Troika.
According to the German economist, Volker Wieland, the new government of Italy must necessarily be supported in creating new reforms. To avoid the worst, Italy may be forced to request a bailout to the Fund Save States (ESM), which is also part of the IMF.
It is true that the Italian debt is the most dangerous, but we do not have to forget the effect of the Troika on Greek economy.
This week market movers will mainly concentrate on the Federal Reserve and Bank of England.
According to analysts, the Fed will finally let you go to a rise in interest rates from the current 0,5% to 0,75%.
Also the Bank of England will have to decide on interest rates, but analysts are convinced there will be no change on the current 0,25%.
Fed and BoE meetings aside, the market movers this week will be many and rather important, considering for example the data on crude oil inventories and those related to inflation of Italy and Euro zone.