ECB Embarks on QE, European Stocks Fall

The recent global stock market tremors has prompted the ECB to make good their declaration last week that they would “start buying assets within days”

From the Bloomberg:

The European Central Bank bought covered bonds for the first time since President Mario Draghi unveiled an asset purchase program last month.

The ECB acquired short-dated French notes from Societe Generale SA (GLE) and BNP Paribas SA as well as Spanish securities from other lenders, according to two people familiar with the matter who asked not to be identified because the information is private. Draghi said he intends to expand the bank’s balance sheet by as much as 1 trillion euros ($1.3 trillion) to stave off deflation in the euro area…

The 250-year-old covered bond market helps fund Europe’s mortgage industry and the notes have historically been attractive to investors because they’re guaranteed by the issuer and backed by a pool of assets. Europe’s market for covered bonds shrank for the first time in at least a decade last year and will decline further in 2014 and 2015, according to the European Covered Bond Council.

Covered-bond purchases are the latest addition to the ECB’s medley of unconventional tools that also includes targeted long-term loans to banks and a negative deposit rate. The central bank will also start buying asset-backed securities before the end of the year.

European stock markets apparently “sold on news” or has been disappointed or could be both. 

Nonetheless the region’s stock market response to the initiation of ECB’s QE has been to shave off a sizeable share of Friday’s pump.

This implies that last week’s collapse of the European stock markets remains a significant force which bulls and policymakers have yet to overcome.

Interesting.