{"id":16880,"date":"2016-01-24T19:22:18","date_gmt":"2016-01-25T00:22:18","guid":{"rendered":"http:\/\/olduvai.ca\/?p=16880"},"modified":"2016-01-24T19:22:18","modified_gmt":"2016-01-25T00:22:18","slug":"weekly-commentary-draghi-ready-to-fight","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=16880","title":{"rendered":"Weekly Commentary: Draghi Ready to Fight"},"content":{"rendered":"

Weekly Commentary: Draghi Ready to Fight<\/a><\/h3>\n
A few Friday Bloomberg headlines: \u201cAsian Stocks Jump by Most in Four Months on Stimulus Speculation;\u201d \u201cJapanese Stocks Surge by Most in Four Months as Bears Retreat;\u201d \u201cHong Kong Dollar Jumps Most in 12 Years as Global Stocks Rally.\u201d It was quite a week.<\/p>\n

Back in early December I posited that Mario Draghi had evolved into the world\u2019s most powerful central banker. I also stated my view that his inability to orchestrate a larger ECB QE program was likely an inflection point in the markets\u2019 confidence in Draghi and central banking more generally. Mario\u2019s not going down without a fight.<\/p>\n

Global markets were too close to dislocating this week. Wednesday saw the S&P500 trade decisively below August lows. Japan\u2019s Nikkei 225 Index sank to test November 2014 lows. Emerging stocks fell to six-year lows, with European equities at 13-month lows. Wednesday also saw WTI crude trade below $27 (sinking almost 7%), boosting y-t-d losses to 25%. Credit spreads were blowing out, and currency markets were increasingly disorderly. Early Thursday trading saw the Russian ruble down 5.3% (at a record low vs. dollar), with Brazil\u2019s real also under intense pressure. The Hong Kong dollar peg was looking vulnerable. The VIX traded to the highest level since the August \u201cflash crash,\u201d while the Japanese yen traded to one-year highs (vs. $). De-risking\/de-leveraging dynamics were quickly overwhelming global markets.<\/p>\n

The Italian banking sector sank 7% Wednesday, pushing y-t-d losses above 20% (down 32% from 2015 highs). Fears of mounting bad loans and undercapitalization have been weighing on Italian and European bank shares and bonds. This week also saw a notable widening of sovereign spreads to bunds. Despite a post-Draghi narrowing of risk premiums, Italian spreads to bunds widened another seven bps this week, with Portuguese spreads blowing out 35 bps. A fragile European financial sector was rapidly succumbing to a deepening global financial crisis.<\/p><\/div>\n

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…click on the above link to read the rest of the article…<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Weekly Commentary: Draghi Ready to Fight A few Friday Bloomberg headlines: \u201cAsian Stocks Jump by Most in Four Months on Stimulus Speculation;\u201d \u201cJapanese Stocks Surge by Most in Four Months as Bears Retreat;\u201d \u201cHong Kong Dollar Jumps Most in 12 Years as Global Stocks Rally.\u201d It was quite a week. Back in early December I […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[63,7756,4333,233,11936,282,312,1044,661,662,2443,1141,895],"class_list":["post-16880","post","type-post","status-publish","format-standard","hentry","category-economics","tag-banks","tag-credit-bubble-bulletin","tag-crude","tag-ecb","tag-emerging-stocks","tag-european-central-bank","tag-financial-crisis","tag-mario-draghi","tag-qe","tag-quantitative-easing","tag-stock-markets","tag-vix","tag-wti"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/16880","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=16880"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/16880\/revisions"}],"predecessor-version":[{"id":16881,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/16880\/revisions\/16881"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=16880"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=16880"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=16880"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}