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When will Draghi talk become action?

Tuesday, November 18, 2014 - 02:28

Eurozone stocks gain ground and bond yields slip back, thanks to the positive ripple effect of ECB chief Mario Draghi's comments that he is ready to do more to fight deflation. But what is he likely to do? David Pollard reports

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Paris - and the opening of the seasonal market on the Champs Elysee means one thing: Christmas is on. Stallholders hope for bumper sales. But know that in the euro zone, while many consumers are 'haves', many are 'have nots'. As perhaps with the global economy. Hermes Fund Manager CEO, Saker Nusseibeh. (SOUNDBITE) (English) HERMES FUND MANAGERS CEO, SAKER NUSSEIBEH, SAYING: ''We have the United States doing quite well, thank you very much, and so is Australia. We have Europe doing an impersonation of the dead parrot sketch from Monty Python, and we have emerging markets still growing but by not as much as before.'' ECB chief Mario Draghi is doing his best at resuscitation And European share markets, at least, rose for a second day on a promise of further stimulus measures, as made to the European Parliament. (SOUNDBITE) (English) EUROPEAN CENTRAL BANK PRESIDENT, MARIO DRAGHI, SAYING: "The euro is irreversible, and the ECB will continue to do whatever it takes within its mandate." Will he deliver? Draghi is acknowledged as a master of using words to boost sentiment rather than deeds. Even so, many are placing bets very firmly on the prospect of QE, hoping Draghi can't afford not to. If he doesn't, then euro zone deflation could trigger an eventual collapse of the euro. Says Hans Stoter of ING Investment Management - though hopes it won't go that far. (SOUNDBITE) (English) ING INVESTMENT MANAGEMENT CIO, HANS STOTER, SAYING: ''We believe that the ECB will do what is needed and will be able to convince core country politicians to do what's needed to avoid deflation. Deflation would really be a pretty bad scenario for Europe.'' The next question is timing. The ECB's current asset-buying programme is only just getting into gear. And, next month, banks get a second chance to take up its offer of targetted loans. Draghi may wait to see what impact those measures have. IG's Alastair McCaig. (SOUNDBITE) (English) IG MARKET COMMENTATOR, ALASTAIR MCCAIG, SAYING: '' It's maybe a little bit of a kind of no-man's land we find ourselves in at the moment ... I think the chances of any sort of quantitative easing happening this side of 2014's year-end seems unlikely. I think continued speculation's probably going to be par for the course.'' Obstacles remain to QE, of course - especially from Germany where many see bond buying as simply propping up reform-shy peripheral states. And with the latest data offering hope the euro zone economy is not quite as desperate as many fear, Draghi may well let Europe's economic wheels take another turn before acting on any promise.

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When will Draghi talk become action?

Tuesday, November 18, 2014 - 02:28