Yahoo Finance Eurozone Gears Up for Another Stimulus, but Will It Work?
Why Asset Managers, Financials Are the Worst-Hit by the Slowdown
Quantitative easing
ECB (European Central Bank) president Mario Draghi has made a case for further monetary easing when the Governing Council meets to set rates in March 2016. Draghi said, “The risks of acting too late outweigh the risks of acting too early.”
The MSCI Europe Index has fallen by 20% over the past six months. So far in 2016, the index has lost 11.5% due to falling exports and growth in major economies. On a year-to-date basis, Germany’s DAX has fallen by 14%, France’s CAC 40 has fallen by 9%, and the United Kingdom’s FTSE has fallen by 6.3%.
European Union equities (EFA) have performed in-line with other major markets in 2016. The ECB kept interest rates unchanged at its most recent meeting. The ECB has kept a target inflation rate of 2% in order to revive growth in the region.
However, inflation for December stood at a low of 0.2%, reflecting continued weakness in the markets. The Eurozone’s unemployment rate fell 0.1% to 10.4% in January 2016. However, the rate of decline has slowed consistently.
Export-oriented growth
Competitive quantitative easing between Japan, China, and the Eurozone represents an effort to fuel growth through exports. These exports primarily target North America. Markets expected increased bond-buying sanctions from the ECB due to a fall in gross domestic product (or GDP) growth to 0.3% in 3Q15 compared to 1.5% in 1H15.
In 4Q15, Europe is expected to have seen its slowest quarter of the year. France reported 0.2% GDP growth in 4Q15 compared to 0.3% in 3Q15, reflecting continued weakness. All indications are reflective of slowing growth despite significant monetary and fiscal easing by the ECB.
Stock market performance is a key driver for asset managers’ revenues. Major asset managers in the Eurozone include Goldman Sachs (GS), BlackRock (BLK), Morgan Stanley (MS), Deutsche Bank (DB), and UBS (UBS).
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