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    The results of the ECB meeting

    On Thursday US stock indices moved with high volatility but hardly changed. Investors' attention was focused on the next meeting of the European Central Bank. As the result, the ECB launched the 2nd tapering program (TLTRO II) and cut its base rate from 0.05% to 0. The deposit rate was reduced from minus 0.3% to minus 0.4% and the marginal rate was changed from 0.3% to 0.25%. The volume of asset buyout under the new program has been increased from 60 billion euro to 80 billion per month. The funds will become available due to the money emission. We should note that the ECB has expanded the list of asset buyout. Now it will include bonds of non-bank institutions and ordinary Euro zone companies. The initial currency market's reaction was quite predictable and the euro decreased in rates. However, after the announcement of the ECB head Mario Draghi that he does not expect a further easing of monetary policy, a sharp strengthening of the European currency began. As a result, it reached a 3-week high against the US dollar which has weakened considerably, and also its index has fallen.

    We do not exclude that the positive reaction of investors to the ECB's decision could have a political connotation. The authorities of the Euro zone demonstrated independence from international financial institutions by significantly increasing the scale of monetary stimulus of the economy. Also the 1st tapering program began in January 2015 and should have been running until September 2016. Its course supposed to redeem the bonds with investment grade totaling 1.1 trillion euro. The new program TLTRO II includes the refinancing of banks, and it will begin in July this year and will last during 4 years.



    The aim of the new ECB program is to increase EU inflation to a level of 2% in annual terms from 0.3% observed in January this year. According to his own forecast, this year the inflation rate will be 0.1%, in 2017 1.3%, and only in 2018 will rise to acceptable level of 1.6%. At the same time the ECB lowered GDP growth forecast for the euro area in 2016 to 1.4% from 1.7% expected in his own December report. Now, economic growth of 1.7% is expected only next year. Thanks to a powerful economic stimulus, it may increase to 1.8% in 2018.

    As we can see, the 2nd program of quantitative easing is very extensive and can last about 5 years. Realizing this, market participants are now closed speculative currency positions in the euro, which causes decrease in its value. European stocks are now growing after the fall on Thursday. We believe that their movement is largely due to the dynamics of the exchange rate. With the strengthening of euro stocks become cheaper, and vice versa. However, today there is more positive news from the car manufacturers. BMW increased sales in February by 7.9%, and its shares rose by 4%. Volkswagen announced the reduction of 3 thousands of their office staff. This has contributed to the growth of quotations by 4.4%. It should be noted that today the significant macroeconomic data is not expected neither from the euro area nor from the United States.

    Nikkei rose slightly yesterday and today. The reason is the weakening yen, which may increase the financial performance of Japanese exporters. On March 14-15 we are expecting a meeting of the Bank of Japan. Some investors do not rule out that it declares further softening of monetary policy, taking the example of the ECB. In particular, further decline in rates to the negative area is expected. On Monday morning we'll see Japan orders for industrial equipment in January. In our view, the forecast is negative for the Nikkei.



    Quotes of wheat showed the maximum weekly gain in 3 months because of dry weather in the USA. Note that any references to the natural phenomenon of El Niño in the news may contribute to higher food prices.


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