Friday, 27 July 2012

ECB to do whatever it takes to save euro

Investors are waiting for the Federal Reserve to implement QE3 to help boost markets but in the meantime, a few words from European Central Bank President Mario Draghi will do.

Bloomberg reports Draghi's comments on Thursday:

“To the extent that the size of these sovereign premia hamper the functioning of the monetary policy transmission channel, they come within our mandate,” Draghi said in a speech at the Global Investment Conference in London today. “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro,” he said, adding: “believe me, it will be enough.”

Apparently, it was enough for investors. Markets jumped on Thursday, the S&P 500 rising 1.7 percent and the STOXX Europe 600 surging 2.5 percent. Spain’s 10-year bond yield fell 45 basis points to 6.93 percent.

Economic data on Thursday were mixed.

In Europe, GfK sees German consumer confidence rising to a five-month high in August but Italian retail sales had fallen 0.2 percent in May.

In the US, durable goods orders rose 1.6 percent in June. However, excluding transportation, orders fell 1.1 percent. Orders for non-defense capital goods excluding aircraft fell 1.4 percent, the third decrease in the past four months.

Among other US data, initial claims for jobless benefits fell 35,000 in the week ended 21 July but the Bloomberg Consumer Comfort Index also fell to minus 38.5 in the week ended July 22 from minus 37.9 in the previous period and pending home sales fell 1.4 percent in June.

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