Market Lab Report - Premarket Pulse 3/10/16
Major averages finished yesterday higher on lower, below average volume ahead of today's ECB meeting. Oil continued higher finishing above $38.
Futures are higher by roughly half a percent as the European Central Bank on Thursday cut its key lending rate to zero from 0.05% and pushed the rate on its deposit facility from -0.3% to -0.4%. It will also expand the size of its monthly bond purchases to 80 billion euros from its current level of 60 billion euros beginning in April.
Yet since other countries announced negative rates, their stock markets have fallen. The eurozone announced negative rates for the first time in June 2014 but its market has fallen -4.6% since that announcement. Japan announced NIRP in late January 2016 and its market has fallen another -6.7% since then.
Indeed, the markets seem to be losing confidence in the easy money policy of central banks as they grasp at straws to combat low inflation as they seem to be losing the battle.
The European Central Bank slashed its eurozone inflation forecast for 2016 to 0.1%, much lower than the 1% it forecast in December. The ECB said inflation is expected to be weaker than previously expected into 2017 as low oil prices and a slowing global economy continue to slow the economic recovery.
The issue is that demand inflation, a real measure of a growing economy, is non-existent as global economies continue to falter, creating a potential state of depression while the sovereign debt crisis worsens.
This information is provided by Virtue of Selfish Investing, LLC (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing, LLC. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2016 Virtue of Selfish Investing, LLC. All rights reserved.