All eyes on Draghi

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Mario Draghi

This week all eyes were on the European Central Bank (ECB), which was set to take its interest rate decision on Thursday. The market was hoping that ECB president Mario Draghi would announce measures to combat low inflation in the eurozone. Yet at a mere 0.25%, there is very little scope to lower interest rates even further. What the ECB can do, however, is to buy bonds issued by banks in exchange for cash. This way, inflation will be fuelled as billions of euros are injected into the economy.

The market was hoping that ECB president Mario Draghi would announce measures to combat low inflation in the eurozone. Jacqueline van der Neut Jacqueline van der Neut Investment Funds Specialist

As expected, the ECB did not touch interest rates on Thursday. Explaining his decision, Draghi pointed out that the ECB is prepared to use unconventional means to combat low inflation. But he did not announce what such measures would entail.

European stock markets were unsure as to how to react to Draghi’s statements, vacillating between gains and losses. The value of the euro against the dollar hit its lowest level in over a month.

What else happened last week?

In the United States, Fed chairman Janet Yellen gave a press conference on Monday. Her message was that the Fed is still in a position to help the economy and to keep interest rates low. This contributed to a more positive sentiment in US stock markets. After all, as recently as March, investors still feared that the first interest rate hike would be announced six months after tapering had ended. Yellen’s words brought back a measure of calm, with the broad S&P 500 index reaching an all-time high of 1,891 points on Wednesday.

On the Amsterdam Exchange, it was ING that was in the spotlight this week. At an investors’ meeting organised on Monday, the bank said it expected its loan portfolio to grow. This news strengthened our faith in the bank’s ability to save costs. Once ING has repaid the last tranche of state support in 2015, it will be able to start paying dividend again. In response to this, we raised our share price target to EUR 12.50. Another stock that received public attention was SBM Offshore, whose share price had recently come under pressure amid bribery scandals. The results of an internal investigation by the Brazilian oil company Petrobas showed that no evidence has been found of bribery by SBM Offshore staff. This news does not, however, mean the end of this scandal for SBM, as the public prosecutor and parliament in Brazil are still investigating the matter.

Kick-off corporate reporting season

We’re on the eve of a new quarter, which heralds the beginning of yet another corporate reporting season. The season traditionally kicks off on Tuesday with the publication by the American aluminium producer Alcoa of its quarterly figures, followed on Friday by the US banks Wells Fargo and JP Morgan. The financial markets will also be interested in the meeting minutes of the Fed’s policy committee and the interest rate decision to be taken by the Japanese central bank, both of which will be announced on Tuesday. On Thursday, the Bank of England will be announcing its interest rate decision and the consumer price indices in China and Germany (Friday) may well tell us more about the economic climate and consumer confidence in these countries.

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