Super Mario

ECB Chief Draghi Speaks, Markets Listen -- Again

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  • Why it matters

    Why it matters

    The comments by the ECB president underlined the commitment to bolster economic growth in the euro zone with low interest rates.

  • Facts

    Facts

    • Euro zone prices grew at just 0.4 percent in the year to August.
    • The ECB president, Mario Draghi, restated the ECB’s commitment to keep inflation below 2 percent.
    • The DAX German stock index closed 0.7 percent higher after Mr. Draghi’s comments.
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    Audio

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If there is one voice guaranteed to really move prices on the stock markets it is that of the president of the European Central Bank.

Despite a plethora of bad news this week, including the disappointing IFO Business Climate Index reading that showed German business confidence falling for a fifth month, and a pessimistic forecast from Spain’s central bank, investors remained buoyant. Why? Because of a pronouncement by “Super Mario,” the ECB President Mario Draghi.

On Wednesday, Mr. Draghi told a radio interviewer that his institution would use all of the tools at its disposal to keep interest rates in the euro zone low for a long time to come. This is hardly news but the market reaction once again mirrored investors’ great trust in him.

Most investors are convinced that low interest rates and continued interventions by the ECB in the future will prevent downturns in the markets.

The market reaction once again mirrored investors’ great trust in him.

The German DAX stock index closed 0.7 percent higher on Wednesday after Mr. Draghi’s interview, at 9,662 points. The mood was upbeat on other European markets, including the French CAC 40.

The gains, however, did recede following the grim reports on German consumer sentiment and Spanish growth. For example, stock in TNT Express, a Dutch parcel service, lost more than a tenth of its value after the company warned of declining profits because of lower business and increasing competition. This had a knock-on effect in Germany, pulling down shares at Deutsche Post, the world’s largest mail and logistics company.

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Trust me, it’ll be fine. Source: Reuters.

 

Temporary employment companies, whose business is tightly linked to current economic activity, shared a similar fate. Adecco, the industry’s world leader, reported that the business’s usual seasonal upswing had been less than expected in September. Share prices for the Swiss company’s stock fell several percent. Also on the slide was Randstad, a Dutch company in the temporary employment industry.

The author is an editor on the Handelsblatt finance desk in Frankfurt. Contact: narat@handelsblatt.com

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