Rumors of ECB Expanded QE on Corporate Bonds Sends Global Stocks into a Buying Orgy

It’s been a spectacular rollercoaster ride!

Ever since the recent tremors, the FED and the ECB has been assiduously trying to “jawbone” the stock markets.

The ECB has made good their claim that they will “start buying assets within days”; they have unleashed their version of “covered bonds-asset backed security” based QE a day ago. But since their stock markets showed signs of renewed stress or may have signaled that this has not been enough, the ECB appears to accommodate the steroid yearning markets by feeding them with even more promises of elixir from an expanded QE.  

Such accommodation has been made through the floating of a trial balloon where the ECB’s QE may be expanded to include corporate bonds. 

The UK’s Reuters served as their conduit for massaging of the public’s expectations (bold mine)

The European Central Bank is considering buying corporate bonds on the secondary market and may decide on the matter as soon as December with a view to begin buying early next year, several sources familiar with the situation told Reuters.

The ECB has already carried out work on such purchases, which would widen out the private-sector asset-buying programme it began on Monday - stimulus it is deploying to try to foster lending to businesses and thereby support the euro zone economy.

"The pressure in this direction is high," said one person familiar with the work inside the ECB, speaking on condition of anonymity.

Asked about the possibility of making such purchases, an ECB spokesman said: "The Governing Council has taken no such decision."

The ECB's policymaking Governing Council could discuss the possibility of making such purchases at its December meeting, two of the four sources Reuters spoke to said. All four said such plans were being discussed.

The policymakers could decide at the December meeting to go ahead with the purchases, but such a step is not certain. Should the Council decide in December to proceed, the purchases on the secondary market could begin in the first quarter of 2015, one of the sources said.

From here the US and European stocks went into a manic bid…

European stocks having another melt UP.

So as with US benchmarks. (tables from Bloomberg.com)

Here is the intraday chart of the S&P and Nasdaq (chart from Zero Hedge)

Stock markets of Europe and the US virtually ignored the response by the Financial Times in downplaying the rumors…

The European Central Bank has not yet put the issue of buying corporate bonds on the agenda for its December policy meeting, according to two people familiar with the matter…

While corporate bond purchases are an option that policy makers have discussed in recent months, one of the people familiar with the matter said preparations for buying the debt have not intensified in recent weeks.

However, the person said corporate bond purchases are being considered, along with other ideas, as a possible means to extend the ECB's programme of private sector asset purchases - which at the moment are confined to asset-backed securities and covered bonds - should inflation and growth in the eurozone continue to disappoint.

Stock markets are about earnings and growth? Hardly. They have mutated to become heavily dependent on the political economy of easy money. They have been made as policy tools for political agenda for governments.

Nonetheless with corporate bond purchases “being considered” as part of the program, this would seem like the ringing of the stimulus bells for the Pavlovian steroid starved markets.

As a side note, I posted the other day of the fabulous recovery by Japan’s equity benchmark the Nikkei which regained four fifth of last week’s meltdown or losses in a day. This again has been partly because of promises by Japan's pension fund to reallocate more money to domestic stocks.

Yesterday the Nikkei erased half of the startling one day gain. 

As of this writing the Nikkei’s up over 1.5%.  

Fantastic volatility everywhere

Be reminded, sharp volatility are symptoms of highly unstable markets.

It’s getting more interesting by the day…