Draghi-ng Stocks Down with Rates
Yes, but no, but, yes, there is a rate cut on the way. As Mario Draghi of the European Central Bank (ECB) minced his words Thursday, investors were taken for a wild stock market ride.ย
It’s not the lines, but in how you deliver them. Stifling summer heat on the continent must have gotten to Mario Draghi on Thursday, as he started the day announcing no delay to a quarter-point rate cut, but ended it with furious back peddling. As his press conference drew on, he became more bullish on the economy, adding that a stimulus package hadn’t been entirely ironed out yet. Given the uncertain tone, by the closing bell, the Italian had managed to pull stocks lower on the day of a rate cut! That’s quite an achievement.
Perhaps Draghi was just day-dreaming of retirement later this year when he gets to hand over his economic headache to his nominated replacement, Christine Lagarde?
His message to Eurozone investors was to hang in there while he gets his papers in order, but he did add further comments. Draghi emphasized that risks of a recession were “pretty low,” despite being one of the most central of central banks to cut already negative rates. After all, with an escalating trade war, slowing growth, and increasing reliance on tech, what could possibly go wrong?ย
The dovish monetary announcement from Europe turns heads to the US. Fed Chair Jerome Powell, it’s your move! State-side investors are worried which of Draghi’s narratives Powell will find most convincing, but the infamous cut is still fully priced into the markets. What has Friday got in store?ย