Wall Street Analysts Respond To Mario Draghi
Confused by the implications of Draghi's pre-leaked speech? Don't worry, you
are not alone. As the following sampling of opinions by Wall Street experts via
Reuters confirms, opinions range from the positive to the negative, to the
completely clueless.
IOAN SMITH, STRATEGIST, KNIGHT CAPITAL
"With regards to seniority this point is important. Pari passu will not apply to existing SMP holdings which suggest dealing with Greece remains a problem. A precedent was set in Greece, and they haven't as yet accepted a haircut there so why should an investor believe them that they'll be ranked pari passu?
"The ECB decision to not have seniority in its bond purchasing plan will increase the liabilities of core European nations to the likes of Spain. We'll have to see how effective the anchoring of the short-end of the curve will be, but as it stands it's not an attractive proposition for encouraging 'real' investment back into the periphery."
PETER WESTAWAY, CHIEF ECONOMIST FOR EUROPE, VANGUARD
"Generally I think it's a positive, it's met those expectations, it's the minimum that he could have said to make people think that he really is serious to bring yields down. The conditionality is key to this ... but for now these measures, in conjunction with any other purchases from ESM or EFSF would be very significant.
"This is just the good news that was priced by the markets already, and it has now been confirmed. There is a long-term question of whether this will be enough to meet the long-term financing needs of Italy and that probably remains."
ION-MARC VALAHU, FUND MANAGER, CLAIRINVEST, GENEVA
"The disappointment comes from the fact that the conditionality remains. Nothing can be activated until countries such as Spain or Italy request a bailout.
"European stock markets are still up because the tail-risk has been alleviated. You no longer have a situation like last August."
ANDREW COX, G10 STRATEGIST AT CITIFX, DIVISION OF CITIGROUP, NEW YORK
"Everything Draghi said was very much in line with expectations that have evolved in recent days as a result of a number of leaks. Looking beyond the initial reaction, we expect that the direction of the euro in the days and weeks ahead will be driven by demand for European assets.
"The details for the Outright Monetary Transactions released today add to the credibility of the safety net taking shape in the Eurozone and should support demand for Eurozone assets."
ERIC VILORIA, SENIOR CURRENCY STRATEGIST, FOREX.COM, NEW YORK
"The overall sentiment is that a lot of this was priced in because we got a lot of the leaks of the program in the past few days. Also the downward revision to the GDP growth forecasts for this year and next suggests that there's further contraction ahead in the euro zone and that growth hasn't bottomed. That's also weighing the euro."
RICHARD HUNTER, HEAD OF UK EQUITIES, HARGREAVES LANSDOWN
"I think the market had been building itself up for a much more concrete resolution, and though the snap reaction from the market has been pretty sanguine, it certainly hasn't sent the markets off to the races. As Draghi's speech is digested further I wouldn't be surprised to see a tinge of disappointment creep in, and I wouldn't be surprised to see the market dropping off slightly as there don't appear to be any magic bullets in there."
HANS PETERSON, GLOBAL HEAD OF INVESTMENT STRATEGY, SEB PRIVATE BANKING
"He delivered more or less what was expected by the market. In total it's a positive, but it's not moving the markets a lot. You buy the rumour, sell the fact and this is the fact. It was in line with what most people had expected, but it's good that it happened."
JOHN HARDY, FX STRATEGIST, SAXO BANK
"The details are nothing new but the question is: Will peripheral bond yields continue to fall? What this has done is hand over the process to the political system. Next up is what the German constitutional court rules next Wednesday about the euro zone's rescue fund. So even if the euro does manage to rally from here, it will be temporary."
FRANCOIS SAVARY, CHIEF INVESTMENT OFFICER, REYL, GENEVA
"Nothing new came out from yesterday. It means a lot depends on the country asking for help through the ESM, and Spain doesn't seem to be ready. It means that a lot remains in the hands of politicians. The Germans can put tough conditions on a potential Spanish plan that would impede Rajoy to accept it.
"The dissenting vote shows again that divisions remain and that Germany is not convinced."
MICHAEL SNEYD, FX STRATEGIST, BNP PARIBAS, LONDON:
"It was pretty much in line with the reports we saw yesterday, there were not really any surprises. The fact they clearly stated the programme will be sterilised weakens the risk it will be seen as QE and should stop people using the euro as a funding currency.
"A certain amount of expectations had been built up after we had a lot of details yesterday, but I do not think this weakness in the euro is going to last."
EDWARD SMYTH, INVESTMENT MANAGER, JN FINANCIAL, LONDON
"It doesn't look like he's done enough to bring back confidence at this juncture. It's not bad, but it's expected."
RICHARD MCGUIRE, RATES STRATEGIST, RABOBANK, LONDON
"IMF involvement sought in monitoring/setting conditions for ECB bond market intervention - possibly a bitter pill to swallow for Spain given Rajoy has made it clear the country already meets the necessary conditions.
"We wonder whether the 'Troika-esque' appearance of the ECB's Outright Monetary Transactions (OMT) might result in Spanish resistance to petitioning for such a bailout. If so, market pressure may be needed for Spain to agree to a programme.
IOAN SMITH, STRATEGIST, KNIGHT CAPITAL
"With regards to seniority this point is important. Pari passu will not apply to existing SMP holdings which suggest dealing with Greece remains a problem. A precedent was set in Greece, and they haven't as yet accepted a haircut there so why should an investor believe them that they'll be ranked pari passu?
"The ECB decision to not have seniority in its bond purchasing plan will increase the liabilities of core European nations to the likes of Spain. We'll have to see how effective the anchoring of the short-end of the curve will be, but as it stands it's not an attractive proposition for encouraging 'real' investment back into the periphery."
PETER WESTAWAY, CHIEF ECONOMIST FOR EUROPE, VANGUARD
"Generally I think it's a positive, it's met those expectations, it's the minimum that he could have said to make people think that he really is serious to bring yields down. The conditionality is key to this ... but for now these measures, in conjunction with any other purchases from ESM or EFSF would be very significant.
"This is just the good news that was priced by the markets already, and it has now been confirmed. There is a long-term question of whether this will be enough to meet the long-term financing needs of Italy and that probably remains."
ION-MARC VALAHU, FUND MANAGER, CLAIRINVEST, GENEVA
"The disappointment comes from the fact that the conditionality remains. Nothing can be activated until countries such as Spain or Italy request a bailout.
"European stock markets are still up because the tail-risk has been alleviated. You no longer have a situation like last August."
ANDREW COX, G10 STRATEGIST AT CITIFX, DIVISION OF CITIGROUP, NEW YORK
"Everything Draghi said was very much in line with expectations that have evolved in recent days as a result of a number of leaks. Looking beyond the initial reaction, we expect that the direction of the euro in the days and weeks ahead will be driven by demand for European assets.
"The details for the Outright Monetary Transactions released today add to the credibility of the safety net taking shape in the Eurozone and should support demand for Eurozone assets."
ERIC VILORIA, SENIOR CURRENCY STRATEGIST, FOREX.COM, NEW YORK
"The overall sentiment is that a lot of this was priced in because we got a lot of the leaks of the program in the past few days. Also the downward revision to the GDP growth forecasts for this year and next suggests that there's further contraction ahead in the euro zone and that growth hasn't bottomed. That's also weighing the euro."
RICHARD HUNTER, HEAD OF UK EQUITIES, HARGREAVES LANSDOWN
"I think the market had been building itself up for a much more concrete resolution, and though the snap reaction from the market has been pretty sanguine, it certainly hasn't sent the markets off to the races. As Draghi's speech is digested further I wouldn't be surprised to see a tinge of disappointment creep in, and I wouldn't be surprised to see the market dropping off slightly as there don't appear to be any magic bullets in there."
HANS PETERSON, GLOBAL HEAD OF INVESTMENT STRATEGY, SEB PRIVATE BANKING
"He delivered more or less what was expected by the market. In total it's a positive, but it's not moving the markets a lot. You buy the rumour, sell the fact and this is the fact. It was in line with what most people had expected, but it's good that it happened."
JOHN HARDY, FX STRATEGIST, SAXO BANK
"The details are nothing new but the question is: Will peripheral bond yields continue to fall? What this has done is hand over the process to the political system. Next up is what the German constitutional court rules next Wednesday about the euro zone's rescue fund. So even if the euro does manage to rally from here, it will be temporary."
FRANCOIS SAVARY, CHIEF INVESTMENT OFFICER, REYL, GENEVA
"Nothing new came out from yesterday. It means a lot depends on the country asking for help through the ESM, and Spain doesn't seem to be ready. It means that a lot remains in the hands of politicians. The Germans can put tough conditions on a potential Spanish plan that would impede Rajoy to accept it.
"The dissenting vote shows again that divisions remain and that Germany is not convinced."
MICHAEL SNEYD, FX STRATEGIST, BNP PARIBAS, LONDON:
"It was pretty much in line with the reports we saw yesterday, there were not really any surprises. The fact they clearly stated the programme will be sterilised weakens the risk it will be seen as QE and should stop people using the euro as a funding currency.
"A certain amount of expectations had been built up after we had a lot of details yesterday, but I do not think this weakness in the euro is going to last."
EDWARD SMYTH, INVESTMENT MANAGER, JN FINANCIAL, LONDON
"It doesn't look like he's done enough to bring back confidence at this juncture. It's not bad, but it's expected."
RICHARD MCGUIRE, RATES STRATEGIST, RABOBANK, LONDON
"IMF involvement sought in monitoring/setting conditions for ECB bond market intervention - possibly a bitter pill to swallow for Spain given Rajoy has made it clear the country already meets the necessary conditions.
"We wonder whether the 'Troika-esque' appearance of the ECB's Outright Monetary Transactions (OMT) might result in Spanish resistance to petitioning for such a bailout. If so, market pressure may be needed for Spain to agree to a programme.
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