Will Draghi Deliver the Drugs Tomorrow?

To issue sovereign QE, it ‘tis the question.


We polled our customer base earlier today and the verdict is decidedly mixed --  in fact it's a dead heat.  50% say “YES” Draghi will announce a QE program when the ECB meets tomorrow.  50% said “NO” he won’t.

 

Will Draghi Deliver the Drugs Tomorrow? - yy. poll

 

Unfortunately, our crystal ball is in the repair shop. But as we’ve noted in a previous note, recent language from Draghi, his VP Victor Constancio, and other policy heads (including those of the governing council) all seem to suggest that tomorrow’s meeting will disappoint the YES vote. The likeliest scenario? The ECB will remain in a “wait-and-watch” mode to assess its concurrent programs.  

 

We do suspect a lack of action (hold on rates and a QE announcement) is due to the fact that the Bank only just started to purchase ABS (November 21), the 2nd tranche of the TLTROs will only be allocated a few days following the ECB meeting, and the covered bond purchasing program is in early innings. In addition, we also suspect that the ECB will have to contend with the Germans who oppose sovereign QE on legal grounds.

 

Tomorrow we’ll also get updated ECB staff GDP and Inflation estimates – you know our call is for the estimates to be revised DOWN #EuropeSlowing.

 

 

What’s our investment call?


As Keith noted this afternoon, European Stocks (EuroStoxx 600 Index) are signaling immediate-term TRADE overbought with a risk range of 337-351. The EUR/USD is signaling immediate-term TRADE oversold at $1.23. Broadly, with the “risk ranges” being at the top and/or bottom end of the range increases the probability of a short-term reversal – the probability is as high as it’s been of seeing a big macro reversal.

 

Will Draghi Deliver the Drugs Tomorrow? - yy  stoxx 600

Will Draghi Deliver the Drugs Tomorrow? - yy  EUR USD

 

Matthew Hedrick

Associate

 


Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more