Equity markets took something of a knockback on Thursday despite the ECB indicating they may add further stimulus measures. Although some commentary suggested, Mario Draghi’s press comments were not as dovish as some had expected, despite the continued weakness in the regions economic data. Mr Draghi played down concerns on whether the eurozone could enter a recession. Equity markets have once again become fixated by the actions or otherwise of the global central banks.
There have been signs recently that the US economy is at least stabilising at a lower level of economic growth from the start of the year. The latest US durable goods orders report coming in better than expectations. Commenting on the latest flash Purchasing Manager Surveys the Chief Business economist for IHS Markit points to an annualised growth of 1.6% for the third quarter, up marginally from 1.5% in the second. The market has been steered for the Fed now more likely to cut by 25 basis points rather than the 50 expected a month or two ago.
It is not hard to continue to find bearish sentiment for global stocks. Last months Merrill Lynch fund manager survey reported that levels of cash levels held suggested that investors are the most bearish since the financial crisis. This appears to remain the most unloved bull market in modern times. Analysts fear that cheap rates purely support equity markets. If you can get less than 2% on ten-year Greek debt, as is the case at present, for many investors, this is an example of being caught between the devil and deep blue sea.