Global Equities Outlook Ahead of ECB

Oct 20, 5:33 pm
ECB

All global markets will be looking at the ECB's decision today, but most importantly, everyone will be following the ECB Chairman Mario Draghi’s press conference, which is due 45 minutes after the ECB decision. His remarks are likely to have the biggest impact on the markets, one that is even more notable than that caused by the decision itself.

Why Is This Important?

The previous decision by the ECB hinted that the ongoing QE program is likely to end in March of next year. However, since the last meeting, economic activity has not been strong enough to support this idea. Today’s German PPI also added more doubts regarding the ECB's plan on keeping QE unchanged. We therefore suspect that it might extend it beyond March of next year. Therefore, today’s press conference could give us some clues about the bank's plan.

How Will Equities React?

Global equities like easy policies by the central banks. These policies are the reason behind the full recovery in global equities after the well-known financial crisis back in 2008/2009. Meanwhile, with the ECB's QE in place, everyone has been noticing the notable rise in global and European equities. This has been the case since the announcement of the current QE programme. But today, traders and investors will be looking for any hint that the QE might be extended beyond March of next year. If they get what they want, global equities are likely to close the day in green.

Is Disappointment Possible?

The short answer is yes. Mario Draghi has surprised the markets many times since he took office. What will this disappointment look like? If the ECB's chairman sticks to his previous statement (to end QE in March of Next Year), this would be considered a notable disappointment.

How May Equities React To Potential Disappointment?

There will be a high possibility for equities to close the day and the week in red. However, we are in the middle of the earnings season around the world. Therefore, if we see a notable decline in global equities today, it might be short-lived. This is primarily because a better outcome in European earnings should support the indices. However, the last thing we want to see is a discontinuation of QE with lower earnings in Europe. This would be a double negative factor.

Levels To Watch

Index

S3

S2S1PivotR1R2

R3

DAX30

18022.65

18076.0518119.0018172.4018215.3518268.75

18311.70

FTSE100

6932.88

6954.406988.167009.687043.447064.96

7098.72

S&P500

2126.37

2130.932135.262139.822144.152148.71

2153.04

DowJones

18022.65

18076.0518119.0018172.4018215.3518268.75

18311.70

Nikkei 225

16874.50

16906.4816952.7016984.6817030.9017062.88

17109.10

CAC40

4468.14

4482.044501.174515.074534.204548.10

4567.23

 
Nour Eldeen Al-Hammoury

Nour Eldeen Al-Hammoury has more than ten years of experience in focusing on foreign exchange and global economic developments, as well as central bank policies and intermarket analysis (global markets relationships). Nour Eldeen is a regular on many major TV networks (several times each) such as: BBC Radio, BBC World News, Al-Jazeera, Al-Hurra TV CNBC Europe, CNBC Asia, CNBC Arabia, Al Arabiya, Bloomberg, Russia Today, Dubai TV, Sama Dubai, Skynews Arabia, Qatar TV and Future TV News.