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Draghi attacks globalisation

| Posted by: Paul Donovan | Tags: Paul Donovan

  • The ECB easing was designed to be more than markets expected (though markets were not necessarily appreciative), with offsets for the banking sector in acknowledgement that further negative rates are really just a tax on banks and large depositors.
  • Globally we have Draghi's relatively aggressive tightening of capital controls. The TLTRO offers funding to banks, on condition the money is lent within the Euro area (not outside it). Market forces make this an effective capital control, continuing our theme of the collapse of capital globalisation.
  • Germany has three key local elections this weekend. Normally this is not a focus for markets, but to descend into childish portmanteau terms investors have moved from worrying about Grexit, to contemplating Brexit, to potentially considering Mexit (Merkel's exit).
  • The US gives us import and export prices which are useful to economists and sadly underappreciated by financial markets. The recent weakening of the dollar against the Euro (which Draghi's capital controls may further) should in time raise US export price indices.