Daily Agenda: Markets Brace for Draghi Easing

Investors focus on whether the ECB can spark increased demand in Europe; S&P cuts ratings of largest U.S. banks; Brazil’s president faces impeachment.


The European Central Bank meeting today is widely expected to include an announcement of increased quantitative easing. Data for the common-currency zone released this morning show that the central bank’s President Mario Draghi will face an uphill battle kick-starting higher growth levels. Eurostat retail sales data for October fell by 0.1 percent for the month, the second contraction in a row. Meanwhile, service-sector flash purchasing-manager index figures released by Markit were softer than consensus forecasts, and the French institute of Statistics confirmed that the jobless rate there remains at a multi-decade high. In advance of any announcement, the euro contracted versus the currencies of primary trading partners, shedding more than 0.6 percent versus the dollar. While Draghi holds the spotlight, Federal Reserve Chair Janet Yellen will underscore the diverging paths that now lay before her and her European counterparts in her second day of Congressional testimony.

S&P cuts bank ratings. On Thursday, New York credit-ratings agency Standard and Poor’s reduced its ranking of eight major U.S. banks citing the lessened likelihood that the government would provide bailouts for systemically important institutions. Bank of America, Citigroup, Goldman Sachs and Morgan Stanley were cut to BB+ while Bank of New York Mellon, State Street and Wells Fargo were reduced to A and JP Morgan bumped down to A-.

Rousseff faces impeachment. Brazilian President Dilma Rousseff now faces an official impeachment process as the Petrobras scandal investigation takes its toll on her party’s leadership and growth in Latin America’s biggest economy stagnates. Earlier in the week, analysts at Goldman Sachs warned that a depression is possible for Brazil as it struggles with prior excesses.

McDonald’s Luxembourg division eyed. On Thursday fast-food giant McDonald’s Corp. was revealed to be the latest multinational to face a European Union investigation into its tax domicile in Luxembourg. Other companies that have used the Grand Duchy’s favorable tax regime are also believed to be under scrutiny.

Brewing assets shopped. Leuven, Belgium’s Anheuser-Busch InBev on Thursday confirmed that it is considering sales of London’s SABMiller’s brands in order to pass regulatory muster for the proposed merger between the two giant brewers. Both Italian Peroni and Dutch Grolsch labels are said to be up for sale.