Yesterday, just before Mario Draghi started his press conference where he unveiled the new ECB bond buying scheme, we tweeted:
Well, that rule has been violated BIG time.
Not only did stocks surge yesterday, stocks are surging today.
We can’t remember anything like this kind of reaction, really at any point in the crisis. The story of the last few years has been for leaders to constantly fail to live up to expectations.
In his note last night, Dan Greenhaus of BTIG wrote:
Over the last few days though, the prospect of greater central bank easing has come into focus. We thought Draghi would disappoint and while we found nothing surprising in his remarks, investors were clearly pleased. We got this read wrong. That said we are struck by how little people care, no matter how “necessary” ECB intervention is/was and despite our calling for it for several quarters, that a wholly unelected body of individuals now control the economic fate of several European countries.
Greenhaus is not a lone about being surprised that Draghi didn’t disappoint. Pretty much everyone thought he would (which gives a hint as to why things have gone so violently in the other direction).
The fact of the matter is that (with conditions) the ECB has now pledged to do unlimited buying of sovereign bonds. That’s huge.
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