This week, the ECB upped the ante, by adding corporate bonds to its 80-billion-euro-per-month spending spree of asset purchases. In the process, adding to its bloated balance sheet that’s chock-full of shaky government bonds already.
At least the ECB is “diversifying” its portfolio in its latest, desperate attempt to engineer growth through targeted monetary “stimulus.” Will it work?
Survey says: Not likely!
Since early 2015, the ECB has gobbled up nearly 780 billion euros of: government bonds, asset-backed securities and covered bonds – and it’s not done yet.
|The ECB has stepped up its spending spree. What does it have to show for it all? Not much.|
What does the ECB have to show for all this stimulus? Paltry economic growth of just 1.6% over the past year and deflation as far as the eye can see.
In fact, by its own published estimates, the ECB now expects Eurozone growth to flat-line at 1.6% this year as well, and it just cut its own growth forecast for 2018.
Apparently this harsh reality has not curbed the ECB’s enthusiasm for throwing good money after bad!
The latest beneficiaries of the ECB spending spree are European corporate bonds. This week, the ECB bought up corporate bonds issued by Belgium-based Anheuser-Busch InBev, Spain’s Telefonica, plus Germany’s Siemens, and Volkswagen.
|“The ECB is really rolling the dice with European taxpayers’ money.”|
The ECB is really rolling the dice with European taxpayers’ money here, since VW is barely an investment-grade credit.
The only thing the ECB accomplishes is to further manipulate European financial markets. It’s no surprise that the bonds being targeted jump in price ahead of time, as European banks and brokers trade ahead of the ECB’s purchase orders, as reported by Bloomberg.
While the ECB might not get the economic growth it’s looking for, at least beleaguered European banks and brokers can make some easy money front-running the ECB. Perhaps this makes the beaten down iShares MSCI Europe Financials ETF (EUFN) a good buy candidate!
The U.S. is nowhere to be found on the list of the top 100 most-peaceful nations in the world. Almost, though. It ranks as 103rd. The Global Peace Index, which rates the relative peacefulness of 162 countries, ranked countries such as Cuba, Burkina Faso, Haiti and Bangladesh as “more peaceful” than the U.S. It ranked Iceland, Denmark, Austria, New Zealand, Portugal, Czech Republic, Switzerland, Canada, Japan and Slovenia at the top of the list. War-torn Syria was at the bottom. Here’s a link to the report.
Airbnb CEO and co-founder Brian Chesky said the company had no tolerance for racism after incidents of racial discrimination by hosts that led to online protests. He said the firm would spend months on a total revamp of its service, seeking to prevent discrimination, according to the San Francisco Chronicle. Airbnb is a peer-to-peer service, which allows hosts and guests connect through its website or app to book private lodging. It came under fire for allowing hosts to discriminate against minority guests. Some black guests have complained that hosts refused lodging requests, but accepted them if they reapplied using a white person’s photo, the paper reported.
George Soros expressed confidence that support for the U.K. to remain in the EU would rise ahead of the June 23 referendum, the Wall Street Journal said. “If Britain leaves, it could unleash a general exodus, and the disintegration of the European Union will become practically unavoidable,” Soros told the Journal. He added that the recent strength of the British pound was a sign that a Brexit was less likely. “I’m confident that as we get closer to the Brexit vote, the ‘remain’ camp is getting stronger,” he stated. “Markets are not always right, but in this case I agree with them.”
Are you shocked that the U.S. doesn’t rank in the top 100 of the most-peaceful nations? For those of you who have lived in the U.S. and abroad, what’s your take on “peacefulness.” Speaking of those outside the U.S., how do you in Britain and Europe see the Brexit vote turning out, now that we’re getting close to the Big Day on June 23? Share your views below.
The Money and Markets team