Potential stimulus from ECB lifts European Stock Indices…

Mario does it again.

On Tuesday, the ECB president said the central bank is ready to re-launch a stimulus program if the continental’s inflation outlook remains subdue. The bulls rejoiced.

The German DAX Index pushed decisively upwards. It affirmed 12,000 as technical support. The near-term target is at 12,500 (see Featured Chart). The French CAC Index also jumped through the 5,400 hurdle, which affirmed the intermediate uptrend from 4,600.

In the UK, the FTSE 100 Index also launched a rally above the 7,400 resistance (see below). This upward dynamic maintains the recovery rally from 6,500 and exerts increasing pressure on the 7,500 resistance.

In summary, ECB’s latest verbal intervention will boost stock markets for a while. But to prolong its impact will require some actual policy follow-through. Questions about the size/length/commitment of ECB’s proposal are still unanswered. As such, investors will probably have to guess the answer from EU’s macro data. The poorer the data, the bigger the potential QE. But remember, political crossfire from across the Atlantic (Trump’s tweet) may downsize ECB’s proposal. Not to forget is the Mario will retire this October. Whether his successor will retain this accommodative policy remains to be seen.

 

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