Scoreboard: Draghi's tranquiliser

European stocks soared following soothing ECB statements and a calming of nerves over Portugal and Greece.

US markets were closed for the Independence Day holiday but there was plenty of action over in Europe. Check it out: the Dax rose 2.1 per cent, the CaC was up 2.9 per cent while the FTSE passed the 3 per cent mark, if only just (3.1 per cent). These are massive moves and we all know that only one thing could have caused moves of such magnitude: the promise of mo’ money.

Yep, that’s right – and the market got a promise from both the European Central Bank and the Bank of England to that effect. The BoE even issued a statement, which it normally never does when it leave rates unchanged, saying that the “implied rise in the expected future path of Bank Rate was not warranted by the recent developments in the domestic economy”. Meanwhile the ECB even adopted the language the Fed uses, with boss Mario Draghi stating rates would be lower – or lower for an “extended period”.

Look, the truth is, it’s not like central banks have a choice. I warned in 2009 that ultra-low rates would be a trap, and they are – QE is even worse. Central banks have lost control of monetary policy and that’s a fact. If they ever try to leave and normalise things, well… it isn’t going to be pretty.

But I was probably embellishing a little in stating there is only one thing that could lead to rises of those magnitudes. There are others of course – news on the periphery etc., and here it was good as well. Up till now we’ve been hearing about the fractured governing coalition in Portugal and the threat that Greece may not get the next instalment of its aid (again, for the five hundredth time). Well, now it looks like the Portuguese government might just hang on for a bit longer and Greece may end up getting its aid after all… again.

Forex markets ignored the positive peripheral news and focussed instead on low rates forever and the potential for even lower rates – ‘cause that would make all the difference. The euro lost almost a big figure and sits at 1.2915. Ditto the British pound, which lost nearly two big figures to sit at 1.5075.

The Aussie dollar for its part is up smalls – 35 pips here or there to be at 0.9149, recovering a bit after Reserve Bank Governor Glenn Stevens’ hilarious joke about deliberating on rates for some time was revealed as indeed just a joke. A side splitter for sure, that one, ‘cause that’s what policy makers should do, see – joke around about economic policy! Maybe Draghi will pipe up tomorrow as well: “Jokes, just jokes, everyone – lighten up, sheesh! We’re hiking next month… Eh, eh – gotcha, a beauty!”

Bits and pieces otherwise, data-wise there wasn’t too much and price moves elsewhere were nondescript . Aussie debt futures (the 3s and the 10s) were off only 2 ticks a piece to 97.16 and 97.175 . In the UK, house prices rose 0.6 per cent in the three months to June and are 3.6 per cent higher annually. Car registrations were up by about 13 per cent and that’s pretty much about it.

For the market today, the SPI points to a 0.7 per cent gain. Otherwise, there is no data to speak of that matters for Australia. Tonight everyone will be focussed on the US payroll number. The consensus is that 165,000 jobs were created in June, while the unemployment rate is forecast to fall to 7.5 per cent from 7.6 per cent. Outside of that, German factory orders are probably worth watching as well.

Have a great weekend…

Adam Carr is a leading market economist.

Follow @AdamCarrEcon on Twitter.

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