By Geoffrey Smith
Investing.com -- Mario Draghi made his reputation by promising “to do whatever it takes” to save the euro. It says a lot for the faulty design of the euro zone that his language has barely changed even though he’s now well into the last year of his mandate.
In a keynote speech on Wednesday, Draghi wrapped up by saying “the ECB will adopt all the monetary policy actions that are necessary and proportionate to achieve its objective.”
If you look closely enough, the only material difference is that the question is no longer the immediate existential one of the euro’s survival, but rather the ECB’s inability to meet its mandated task of keeping prices stable (inflation has undershot the medium-term target consistently over the last decade). What has not changed is the need to beg the markets for trust.
The appeal is starting to wear thin. When the ECB announced its latest attempts to prop up the economy with cheap long-term loans, markets slumped. This morning euro zone stock markets have turned lower, once again focusing on the implications of Draghi’s gloomy assessment of the economy rather than his promise to fix it.
“We are now seeing a more persistent deterioration of external demand,” Draghi said, and markets listened. They appeared not to bother with the next sentence: “But a “soft patch" does not necessarily foreshadow a serious slump.”
By 05:00 AM ET (0900 GMT), the Euro Stoxx 600 was down 0.12 points, less than 0.1%, while Germany’s Dax was down 0.1%, the French CAC 40 down 0.2% and the Spanish IBEX 35 down 0.1%.
It’s not hard to see why: housing and consumer confidence data out of the U.S. on Tuesday were miserable. China reported overnight that profits at its largest industrial companies fell 14% on the year in the first two months of 2019. Italian business and consumer confidence surveys, released this morning, have both fallen in March, and by more than expected.
Away from monetary policy, the biggest noise in the market this morning is from the auto sector, where Renault (PA:RENA) is up more than 3% after a Financial Times report saying that it wants to acquire Fiat Chrysler (NYSE:FCAU) once it has completed a relaunched merger with Nissan (OTC:NSANY) that was put on ice by CEO Carlos Ghosn’s tax troubles.
The more important element of the story is arguably not so much Renault’s desire, but the tantalising suggestion that Fiat could be the subject of a takeover battle, given that Peugeot SA (PA:PEUP) has also reportedly approached it. Merger optimism needs to be weighed against the likelihood of any Italian government approving such a deal, however.