Many believe this is exactly what ECB president Mario Drgahi implied as part of comments he made late last week.
But Ed Yardeni points out that these were not prepared remarks from Draghi and more in the form of off the cuff remarks. Did Draghi go rogue? Here's Yardeni with a play-by-play :
Mario Draghi likes his job and wants to keep it. He is the President of the ECB, which was created to manage the euro within the European Monetary Union implemented on January 1, 1999. Therefore, it wasn’t all that surprising to hear him say last week that “the ECB is ready to do whatever it takes to preserve the euro”.....the S&P 500 rose 3.6% on Thursday and Friday after Draghi's assurances, while the MSCI Europe stock price index jumped 3.9%. The Spanish 10-year government bond yield plunged from a record high of 7.63% on Tuesday to 6.50% this morning. The euro also surged.
The hoopla was triggered by Draghi’s presentation on Thursday, July 26 at the Global Investment Conference in London. Given the importance of what he said and its impact on the markets, it was very odd that the speech wasn’t based on a prepared text. The ECB’s website billed it as the “Verbatim of the remarks by Mario Draghi.” According to the official transcript, Draghi said, “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.” A video shows that he actually repeated “within our mandate” twice. Draghi seems to be saying that his mandate is to save the euro no matter what.
The markets were happily surprised because Draghi’s remarks suggested that the ECB’s Governing Council...may vote on Thursday to restart the central bank’s program of buying government bonds of debt-challenged euro zone members like Spain and Italy. [As opposed to the markets.]not so happy might be the other members of the Governing Council, who apparently were also surprised by Draghi’s off-the-cuff statement.
Is this why Geithner is in Germany, to try and get everybody on the same page? And what page is that?
Could "within our mandate" simply mean "what we are legally allowed to do"?
ReplyDeleteAnd that might resolve to "dam' little".
I think market jumped because of the fund positioning - mostly in cash, less levered, tightly hedged. It does not take much to move this market.
ReplyDelete