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Daily Agenda: Draghi Promises Anti-Deflationary Measures
ECB chief prepares markets for expanded easing; producer prices plummet in Germany; China shuts down a massive illegal bank.
European Central Bank President Mario Draghi addressed a conference in Frankfurt today with a clear message: Central bank policymakers are prepared to act in the near-term to stem the tide of deflation. With the December meeting only weeks away, expectations for a deposit-rate cut and extension of bond purchases is now near consensus among investors. Draghis dovish rhetoric had a pronounced effect on the bond markets. In the immediate wake of his remarks, two-year German government bonds tested record lows with the percentage of thecountrys sovereign debt trading with implied yields below the ECB deposit rate now approaching 40 percent.
Producer prices slump in Germany. Statistics released Friday by the Statistisches Bundesamt Deutschland revealed weaker than forecast prices at German factories in October. The headline producer-price index contracted by 0.4 percent for the month, a 2.3 percent retreat from October 2014, as commodity costs remained weak.
China shutters shadow bank. Official state media outlets in China today announced that authorities had closed an illegal lender in Zhejiang province that may have handled more than $60 billion in unsanctioned foreign-currency transactions. According to the reports, more than 300 individuals have been arrested in a scheme which allowed capital flows outside regulators purview.
Terror standoff in Africa. French and U.S. military forces are apparently part of a force attempting to rescue a group of hostages believed to number more than 160 in a hotel in Bamako, the capital of Mali. Initial media bulletins indicate that the hostages include Chinese nationals. Yesterday Chinese President Xi Jinping vowed action against the Islamic State for the execution of a Chinese citizen in the Middle East.
Nike announces buyback. In an announcement that came after equity markets closed Thursday, athletic footwear and apparel giant Nike announced a $12 billion stock-repurchase program. The Beaverton Oregon-headquartered company also boosted the dividend by 14 percent and announced a two-for one share split.
ABN Amro IPO. The Netherlands today successfully offered $3.6 billion in shares on ABN Amro, the major bank nationalized during the credit crisis in 2008. Shares rose by more than 2 percent after the debut on the Amsterdam Stock Exchange.
Volkswagen slashes budget. On Friday Wolfsburg, Germany-based Volkswagen announced that it will scale back investments for 2016 by roughly 30 percent, as the troubled carmaker continues to struggle with fallout from an emissions scandal. Total spending next year is now expected to be less than $13 billion and may delay a new model of VWs Phaeton line.