Top officials of the European Central Bank officials pondered on the threats of consumer price regression in the EU.
This concern encouraged them to support a purchase program based on bonds bigger than the offers made by the back’s lead economist for deliberation.
According to the ECB, the euro area was confronted with the challenge of an extended duration of very low inflation. This can increase the prospect of deflationary forces that can affect the economic environment.
Many council members of the ECB gave their nod to the €60 billion or $68.39 billion program in monthly government bond acquisition that begins next month and continue until September of 2016.
Publication of ECB deliberations revealed how the ECB interconnects with financial markets. The Bank of England, Bank of Japan and US Federal Reserve make known minutes of their respective policy meetings. This provides investors and the general public insight into how bank officials look at the economic landscape as well as policy options.
The €1 trillion bond-purchase plan of the ECB indicated the largest and probably most divisive stimulus measure in the institution’s history. It also placed the ECB in the cluster of other major central banks that adopted quantitative easing.
Consumer prices in the bloc declined 0.6 per cent last month which is the most significant deterioration in over five years.
China obtained its biggest trade oversupply in January as imports dived on feeble demand and declining commodity prices.
Imports declined 19.9 percent which is the most substantial drop in over five years. On the other hand, exports went down 3.3 percent which left a trade surplus worth $60 billion.
Falling prices of oil and precious metals reduced imports’ dollar value and produced extended regression of factory prices.
The People’s Bank of China revealed reduction of ratio requirements for bank reserves to make up for liquidity losses.
This is the most significant fall in imports going back to May of 2009. Meanwhile, exports have not come up with a negative yearly reading since March of 2014.
This gloomy trade performance can generate concerns of a possible economic deceleration in China. The Chinese government may bring down its Gross Domestic Product target to about seven percent in 2015 after it posted 7.4 percent in 2014.
Economic indicators are being perceived with watchfulness by market investors. They were hoping that local stimulus spending and easing of monetary policy will bring back confidence and heighten demand in the country’s beleaguered manufacturing industry.
Coal imports decreased almost 40 percent to 16.78 million tons. It was down from 27.22 million tons last December.
China seemed to curtail deliberate hoarding of oil imports which slipped 7.9 percent in terms of volume. Imports from Australia and Russian diminished 35.3 and 28.7 percent in that order.
Chinese officials forecasted fiscal easing measures in the Euro region would have improved demand for Chinese products.
Although exports to the US grew by 4.8 percent to $35 billion, exports to the EU moved back to $33 billion (4.6 percent) during the same period.
Exports to Japan, Hong Kong and South Korea were also negative.
Oil recovered with benchmark Brent gaining significantly after two weeks. This is seen as the biggest gain after 17 years. The fall of oil rig counts as well as fighting in Libya helped halt the sell off.
Prices have gone up almost 20 percent during the last six sessions. Yet, it remained roughly 50 percent below its peak from last year because of oversupply worldwide.
Brent futures showed a nine percent gain which is the largest since 2011 and 19 percent within the past two weeks.
The price recovery was accompanied by strong market instability.
Oil futures in the US posted day to day price swings of nine percent last week due to varied signals about crude inventories. Scores of analysts believe the market will be oversupplied until the first half of this year.
Global count for oil drilling rigs dropped to 261 last month.
Last week, 83 oil rigs also went offline.
The two-week volume in Brent reached close to 3 million contracts, based on data.
Brent settled at $1.23 (2.2 percent) at $57.80 per barrel while US crude closed at $1.21 (2.4 percent).
The violence in Libya affected international oil companies and toppled long-term investments by Western corporations. It also decimated production in Libya which is one of those responsible for setting off the global collapse in crude oil prices.
Libyan oil output declined to approximately 325,000 barrels daily last month from almost 900,000 barrels per day in October. Many oil fields have been seized by Libyan militia groups while others closed down because of the breakdown in peace and order, according to the government-owned National Oil Company.
Sidra, the major oil port, closed down because of heavy fighting.
The finance minister of Greece argued with his counterpart in the Federal Republic of Germany as borrowing costs climbed and bank shares in the country dropped after the European Central Bank opted to discontinue funding from lenders.
German Finance Minister Wolfgang Schaeuble told Minister Yanis Varoufakis it was impractical to turn out electoral vows that caused trouble to other nations.
On the other hand, Varoufakis disagreed with him during a joint press conference. Both ministers were not able to patch up their differences. Schaeuble maintained that the new government should conform to agreements made with the Union and cooperate with the IMF, ECB and European Commission.
Prime Minister Alexis Tsipras is not inclined to extend the bailout program which will conclude by the end of February. It rejected any pitch made by the trio of international lending institutions. It also promised to repeal certain disliked measures imposed by foreign creditors. Aside from this, the Greek premier said it will cut short some privatizations, increase minimum wages, rehire terminated public sector workers, and give bonuses to poor pensioners.
The stock exchange in Athens (FTSE Banks Index – FTATBNK) declined 22.6 percent at first and closed 10 percent behind. Government borrowing costs increased to almost 20 percent which left the country shut out from capital markets.
Central bank governor Yannis Stournaras insisted Greek banks remained stable and are still in control.
Athens offered a bridging system till the end of May to facilitate debt discussions and promised that Greece will do everything to keep away from default.
French President Francois Hollande as well as Prime Minister Matteo Renzi of Italy supported the decision made by the ECB and urged both sides to arrive at a quick conformity.
The greenback recovered against its major counterparts after it incurred the worst single day loss in 12 months.
This was boosted by the perceived long-term strength of the US dollar and slow movement of the Greek debt pact.
Traders have started buying the currency again after markets became doubtful that real progress has been achieved in the Greece negotiations.
FOREX analysts believe the direction toward more stringent fiscal policy in the US and looser policies in the European Union and Japan continued to fortify the dollar.
At the last reading, the dollar index was up 0.39 percent (93.962) following a decline of almost one percent yesterday.
However, the currency plunged versus the Taiwan dollar to finish at NT$31.473 due to reduced apprehensions about the euro region’s debt issues. This prodded investors to increase shares in local currencies.
Expectations for an increase of interest rates have already waned encouraging traders to sell more US dollars. Likewise, foreign institutional purchases in the local currency gave more pressure on the US currency.
The New Zealand kiwi soared above one percent and rallied from a recent trough of four years.
US yields scaled up and made the biggest comeback in 14 months. Commodity currencies bannered by crude oil were up approximately 19 percent.
The Aussie dollar stayed close to 78 cents (US) and recovered following a six-year slump.