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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. 

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