Halister News

--ANTONY SGUAZZIN

Economic Release Details: {POREANN Index ECOD} --WOJCIECH MOSKWA

(Bloomberg) -- Credit markets’ net negative reaction to yday’s headlines that suggested ECB may look to taper QE program after March, while incredulous to some investors, highlights the degree to which asset prices are distorted. Risk assets have become hooked on monetary stimulus since 2008 and any prospect of that supply ending could leave them susceptible to a swift reversal in risk tolerance levels.

• ECB QE was always perceived by market participants as a finite exercise, to be scaled back when economic conditions were sustainably robust enough to allow that
  • Euro-area headline CPI (+0.4%), PPI (-2.1%) and GDP (+1.6%) certainly not perceived as strong enough to justify a near-term move towards ‘tapering’
• Seeds of doubt may now have been sown over future path of ECB policy; if polemic gains momentum over coming months, while macro data remains anemic, it could damp risk appetite levels and trigger re-steepening of credit quality curves
• Expect intense focus on ECB rhetoric over coming days, weeks
  • Renewed taper talk would likely trigger fresh selloff in risk assets while any dovish remarks, taper denial, may persuade investors to look at current back-up in spreads as an attractive entry point

• NOTE: Simon Ballard is a credit strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.

(Bloomberg) -- U.K. Sept. services PMI est. 52.2 vs prev 52.9.

• U.K. Sept. composite PMI est. 52.3, prev 53.6

(Bloomberg) -- A Bloomberg News report on ECB QE tapering sent shock-waves through global markets yesterday, sending core European govt bond curves steeper, peripherals bond spreads wider, and EUR ccy higher.

• As markets continue to digest the story, analysts suggest that tapering of QE was the expected method to reduce accommodation, and still remains a long way off, as the ECB struggles to meet inflation targets

• RBS (Imogen Bachra)
  • Story only stating the “fairly obvious” that QE will be tapered, rather than suddenly stop; never a realistic scenario where QE would suddenly stop
  • Key point is the time-line, still see the date when QE is tapered as a long way off
  • Markets are unlikely to follow through strongly, don’t believe news will be taken as a hint at a radically different attitude to inflation risk

• Mizuho (Peter Chatwell)
  • ECB story does not include any information of when the program could be wound down, though it does add to hawkish comments from some Bundesbank and Fed officials

• RBC (Peter Schaffrik)
  • Offers very little concrete developments; worth remembering previous source-based stories suggested the ECB would be looking to change capital key
  • ECB has not achieved their inflation target, which they cite as key to how long QE purchases will run for
    • Early abandonment of the program before inflation target has been achieved would be a blow to credibility

• ING (Ben Schroeder)
  • Ahead of any tapering, QE program will be extended in December first; ECB was fast to clarify that the “governing council has not discussed these topics”

• BNP (Steven Saywell)
  • Talk of ECB QE tapering is very much misplaced; comments are more about the ECB’s eventual exit strategy rather than any indication of the actual timeframe for exit
  • Core inflation is at 0.8% and ECB likely to revise down inflation forecast at the December meeting: MORE

• Standard Chartered (Eddie Cheung)
  • Too early to price in ECB tapering potential as the central bank is still likely to extend QE: MORE