ECB stimulus already priced into market: Pros

The markets have already priced in the quantitative easing that the European Central Bank is expected to do next week and he doesn’t think it will be very powerful, David Malpass, president of Encima Global, told CNBC Wednesday.

Therefore, he believes the markets are entering a phase of global rebalancing.

“People will get tired of just being in the U.S. and will take a look at some of the emerging markets, oil, the euro and so on,” Malpass said in an interview with “Closing Bell.”

David Hale, chairman of David Hale Global Economics, agrees the market has been discounting the anticipated QE for several weeks.

“Bond yields in Europe are at record low levels. Leaving aside the last few days, stock markets have been resilient. So I do think the expectation of this happening is now broadly in the market because of both comments by [ECB President Mario] Draghi and other members of the monetary policy council.”

Hale expects a “decent” amount of QE but said he doesn’t think it will work well enough to be stimulative.

“The bond yields are already low, and remember the ECB is going to finance all those bond purchases with bank financing,” he said. “In the U.S., 18 percent of bank assets are stuck at the Fed, dead money. So it’s not really a good move for Europe that’s going to cause stimulus.”

Malpass thinks the stimulus will be $500 billion euros.

“The primary impact will come through a falling currency,” he said.

He thinks the euro could drop to 1.1 against the U.S. dollar and “if things get bad enough going out six months or nine months, it might even be parity with the U.S. dollar.”

 Varchev Traders

Read more:
If you think, we can improve that section,
please comment. Your oppinion is imortant for us.
WARNING: Any news, opinions, research, data or other information contained within this website is provided as general market commentary and does not constitute investment or trading advice. Varchev Finance Ltd. expressly disclaims any liability for any lost principal or profits which may arise directly or indirectly from the use of or reliance on such information. Varchev Finance Ltd. may provide information, quotes, references and links to or from other sites and blogs and other sources of economic and market information as an educational service to its clients and prospects and does not endorse the opinions or recommendations of the sites, blogs or other sources of information.
Varchev Finance