FT Alphaville Rumours of ECB bailout calm markets
Rumours of ECB bailout calm markets
Posted by
Joseph Cotterill on May 07 17:22. One of the
grimmest weeks on European bourses since the dark days of late 2008 ended with a slight melt-up on Friday,
compared to earlier losses — thanks to rumours of a European Central Bank rescue.
Flashes at the European close, via Reuters and emphasis FT Alphaville’s:
RTRS-EUROPE’S FTSE EUROFIRST 300 PROVISIONALLY CLOSES DOWN 3.7 PER CENT AT 969.32 POINTS
RTRS-EUROPE’S FTSE EUROFIRST 300 RECORDS WEEKLY LOSS OF 8.75 PER CENT, THE INDEX’S BIGGEST WEEKLY DROP SINCE NOV 2008
RTRS-BRITAIN’S FTSE 100 DOWN 2.5 PCT, GERMANY’S DAX DOWN 3.3 PCT AND FRANCE’S CAC 40 DOWN 4 PCT
The drops might have been worse, but for this odd bit of rumour:
MKTS…Spec of 600bn EUR ECB loan facility to be announced over weekend, 1yr 1% loans to cover 1100 banks
And we do emphasise that this remains market speculation for the moment. On the other hand, it’s interesting to note that the ECB did
commit (far smaller) emergency funds to calm money markets in August 2007. (
H/T Alea).
Much less speculative are the growing calls for the ECB to act on government debt panic with a round of quantitative easing, however.
Analysts have been calling on the ECB to exercise the
‘nuclear option’ of buying up government bonds in order to protect interbank lending from succumbing to fears over sovereign debt contagion in the eurozone.
Not just analysts, either. As the
Association of Financial Markets in Europe told FT Alphaville on Thursday, its members are also concerned:
ECB President Trichet said on Thursday that the bank’s governors had not discussed any such bond purchase so far, however,
as the FT reports.
Either way — an interesting weekend for the ECB is in the offing.