Can Europe’s ailing banks really count on Draghi?
- European banks are direct recipients of ECB’s new ‘QE-lite’ TLTRO programme of long-term funding at attractive rates.
- Bank stocks duly rose—at least at first—on the announcement which was a partial surprise as the ECB gave details of timing (September 2019 to March 2021) and scope sooner than widely expected.
- But that didn’t last. The Euro STOXX Banks index has plumbed 4-year lows, down as much as 4%
- TLTRO III came with multiple negative trimmings. Some—like a big cut of growth the ECB expects in 2019 (now just 1.1% from 1.7%)—are alarming to investors in already struggling banks
- The ECB also surprised by pushing out the date of its first hike in a decade to "through the end of 2019, and in any case for as long as necessary" from a previously vague though at least earlier, ‘through the summer’ guidance.
- For some of the weakest global banks, many domiciled in the Eurozone, the news is little short of a revenue warning at the margin.
- Deutsche Bank stock is infamously in a possible ninth possible annual decline in 12 years.
- Since December though, shares have tacked on as much as 10%, as the market sizes up the revamp plan of its new CEO
- Technically, the appearance of a rising wedge pattern in a downtrend can be interpreted as bearish
- Recently established support at €7.70 looks far less convincing than the kickback low near €7.10 from early February. Breach of €7.70 could be the first sign that QE-lite won’t be as bullish news for Deutsche Bank and other laggardly banks as it appears
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.