“The confirmation that the ECB leaves its policy parameters unchanged and will persist with ultra-flexible policy longer than implied by previous statements will not surprise investors,” said Andrew Kenningham, chief economist for Europe at Capital. Economics.
“However, today’s policy statement is arguably a little more accommodating than one might expect as the Bank has set the bar to raise interest rates a little higher than it did. ‘could have done it,’ Kenningham added.
Remember: the ECB announced earlier this month that it had abandoned its old policy of targeting inflation “below but close to 2%”, a target that many investors and economists have found vague and confusing.
Instead, the revamped ECB will pursue inflation of 2% over the medium term, and officials will have the opportunity to exceed the target if necessary.
The change comes as the central bank continues to swallow bonds as part of its massive stimulus efforts.
What mass? Try $ 1,400,000,000,000. The ECB has purchased € 1.2 trillion ($ 1.4 trillion) in bonds since March 2020 as part of its pandemic emergency response program.
But more is on the way. The central bank continues to underwrite bonds at a rate of 80 billion euros ($ 94 billion) per month in the name of the fight against the pandemic, with total purchases of 1.85 trillion euros (2.2 trillions of dollars) authorized under the program.
This is in addition to the roughly 20 billion euros ($ 24 billion) per month in bond purchases the ECB is making under a separate stimulus package launched in 2014 called the Asset Purchase Program. .
Economists expect to learn more about the future of bond buying programs following ECB meetings in September or December.
Crystal ball: Barclays analysts said ahead of Thursday’s decision that they expected the central bank to end its pandemic bond purchase program in March 2022, assuming the further increase in coronavirus case does not send countries back into very restrictive lockdowns.
But that will not mean the end of the stimulus. At the end of the emergency pandemic program, Barclays expects the ECB to “significantly” increase bond purchases under the asset purchase program.
Barclays estimates that the ECB will buy a total of 700 billion euros ($ 825 billion) of bonds in 2022 under the two programs. This is in addition to the hundreds of billions owed for the rest of the year.
“We expect policy rates to remain at current levels and that ECB purchases will continue in one form or another (via net purchases and reinvestments in 2022, and reinvestments thereafter) beyond our horizon. forecast and at least until the end of the ECB’s 2023 forecast horizon, ”Barclays analysts said.
This means that the era of super-large stimuli is set to continue.
Door closes to Chinese tech IPOs on Wall Street
Things are looking pretty dire for Chinese tech right now, especially companies that are considering overseas listings as a way to raise funds. The cold created by tensions, both within China’s borders and with the United States, could cripple foreign investment in Chinese technology.
Investors are already shaken. China’s unprecedented tech crackdown has wiped $ 1 trillion from the value of overseas-listed Chinese tech stocks since February – one of the worst sellers in history, Goldman Sachs analysts said in a report. research report last week.
And since Didi’s shares collapsed this month after its New York IPO – following the scrutiny the rideshare company has faced by Chinese regulators and US lawmakers – a wave other Chinese companies have reportedly given up on plans to go public. in the USA.
According to Doug Guthrie, professor and director of China Initiatives at Arizona State University’s Thunderbird School of Global Management, this “could very well be” the end – at least temporarily – of American lists of Chinese companies. He added that a “serious pause” on those lists could be in effect until US-China relations improve.
“The Chinese government is sending a very clear signal to Chinese technology companies and the rest of the world that Chinese organizations must work closely with the Chinese government,” Guthrie said. “Companies that have grown too big and global too quickly will be held back to ensure they work together with the priorities of the Chinese government. “
Remember: U.S. listings have long been an important way for Chinese companies to raise foreign capital. Despite tensions between the two countries, Chinese companies still raised around $ 13.6 billion on U.S. lists last year, the best annual total since 2014, when Alibaba went public in a $ 25 billion New York IPO, according to data provider Dealogic. 2021 was also shaping up to be a record year before Didi’s IPO.
Elon Musk wants bitcoin to succeed
Tesla CEO Elon Musk is one of the strongest voices in the cryptocurrency world. It frequently uses its massive platform on Twitter to post on various digital assets and often causes their prices to fluctuate sharply.
Speaking at an event alongside Twitter CEO Jack Dorsey and Ark Invest CEO Cathie Wood, Musk said the only major personal investments he had outside of his Tesla businesses and SpaceX were in bitcoin, ethereum, and dogecoin. He added that Tesla and SpaceX also own bitcoins.
Despite the turbulence he created in the crypto world, Musk said he was “a supporter of bitcoin and the idea of cryptocurrency in general.”
Remember: Dogecoin fell in May after Musk appeared on Saturday Night Live and called it a “commotion.” That same month, Musk said Tesla would stop accepting bitcoin as a form of payment due to the sheer amount of energy used to mine it, causing the price to drop.
It’s not always easy to analyze Musk’s claims about crypto. But now he talks like an investor.
“If the price of bitcoin goes down, I lose money,” Musk said. “I could pump, but I’m not draining.… I certainly don’t believe in increasing the price and selling, or anything like that. I’d like to see bitcoin succeed.”
Ahead of the opening bell, investors will get a glimpse of earnings from Abbott Labs, American Airlines, Blackstone, Biogen, Domino’s Pizza, Southwest Air and Union Pacific.
Also today :
- Intel, Snap, Twitter and Capital One earnings are released after the close.
- Data on U.S. jobless claims will be released at 8:30 a.m. ET.
- Existing US home sales at 10 a.m. ET.
Coming tomorrow: Flash PMI data; Benefits of American Express, Honeywell and Kimberly-Clark