Daily Agenda: All Eyes on Draghi and the European Central Bank

CIBC posts disappointing numbers; Brazil raises rates; U.S. sees drop in crude supplies.


Shopper in the Westminster area of London where the Euro is accepted as legal tender. The U.K. signaled the time isn’t right to swap the pound for the euro, citing an overvalued pound, concern European Central Bank policies are inflexible and a surge in British house prices. The London Eye rotating observation wheel is seen in the background. Photographer:Christopher Cox/Bloomberg News.


With European Central Bank president Mario Draghi and his colleagues announcing no policy changes today in Frankfurt, investors must consider whether or not the governments of the European Union’s primary economies, particularly Germany and France, are willing to implement political reform that would see an easing action taken to its logical conclusion. For now, most analysts agree that the bank will take action soon, although not necessarily today. “While the ECB will likely downgrade its inflation and growth forecasts again today,” noted Douglas Porter, chief economist for BMO Financial Group in Toronto, in a research post this morning. “Policymakers probably want to take time to assess the impact of prior moves. Look for more easing (sovereign bond buying is likely next) from the ECB but not until early next year.”

ECB holds rates steady; European markets tumble. ECB president Draghi announced at 8:30 am New York time that the bank is not injecting any new stimulus - for now, at least. The bank’s governing council is planning to decide in early 2015 whether or not present policies are sufficient to meet inflation targets. If not, said Draghi, this would entail “altering the size, pace and composition of our measures.” The euro rallied and European markets dropped upon the news.

U.S. data on deck. With the U.S. Department of Labor employment situation report for November due out tomorrow, the weekly initial jobless claims count will be a primary focus for markets this morning. Consensus forecasts call for a pullback after last week’s unexpected spike to 313,000 newly unemployed.

CIBC disappoints. Canadian Imperial Bank of Commerce released fiscal fourth quarter earnings today. Canada’s fifth-largest lender reported a decline in net income of C$1.98 ($1.74) per share, (C$2.24 excluding certain items), coming in below consensus analysts forecasts.

Brazil raises rates. The Banco Central do Brasil announced yesterday an increase in the benchmark Selic rate to 11.75 percent, a half-point increase following a 25-basis-point upward move in October. While the overall activity in the Brazilian economy continues to send signals of softening, bank leaders appear intent on keeping inflation at bay, as consumer prices remain significantly higher than bank target levels.

Crude supplies drop in the U.S. West Texas intermediate crude oil contracts are trading in a narrow range today after yesterday’s weekly EIA stockpile indicated a 3.7 million barrel decrease in domestic inventory. In the wake of the OPEC decision to maintain its present rate of production, multiple large North American producers have indicated that they have no plans to curtail activity despite the selling pressure in oil markets.