ECB and Fed Easing Promises Prompts for a Global Stock Market Melt-UP

All it takes to reverse the mood has been promises of more monetary steroids by central banks to steroid addicted financial markets…

First the European stock market melt-UP, from Bloomberg:

European stocks climbed the most in three weeks, erasing their losses for 2015, amid optimism monetary policies by central banks will support the economy.

The Stoxx Europe 600 Index rallied 2.8 percent to 342.35 at the close of trading, extending gains as ECB President Mario Draghi said the central bank’s measures may include buying sovereign bonds. A report today showed German factory orders in November fell more than projected, adding to yesterday’s weak inflation data in boosting speculation the ECB will begin quantitative easing at its next meeting on Jan. 22.

See bad economic data extrapolates to good news—a justification for more bailouts.

Image from stockcharts.com

Next the US version, from another Bloomberg article: (bold mine)

U.S. stocks climbed, with the Standard & Poor’s 500 Index erasing its 2015 declines after the Federal Reserve signaled caution on interest rates even as growth shows signs of accelerating. The euro sank on speculation policy makers in the region will need to bolster stimulus…

Most Fed officials agreed their new policy guidance means they are unlikely to raise rates before late April, according to the minutes released yesterday. A number also expressed concern inflation could remain below target. Some policy makers are concerned over the risks posed by overseas economies. Policy actions by foreign central banks may help, the minutes said.

Those sentiments were echoed in comments by Fed Bank of Chicago President Charles Evans.

Rate ‘Catastrophe’

“I don’t think we should be in a hurry to increase interest rates,” Evans said during a discussion yesterday with Lars Peter Hansen, a Nobel prize-winning economist at the University of Chicago. Later in the presentation, Evans said such a move to tighten too soon would be a “catastrophe.”

Each time US stock markets suffer a tantrum, the FED bails them out. The result has been dramatic bouts of short squeezes. This would mark the “2nd biggest 2-day short-squeeze in 14 months... 2nd only to the one that occurred on the December FOMC meeting” according to the Zero Hedge.

Claudio Borio, Head of the Monetary and Economic Department of the Bank for International Settlement warned on this during their Quarterly review last December:

Once again, on the heels of the turbulence, major central banks made soothing statements, suggesting that they might delay normalisation in light of evolving macroeconomic conditions. Recent events, if anything, have highlighted once more the degree to which markets are relying on central banks: the markets' buoyancy hinges on central banks' every word and deed

The only thing  “easing” means has been to tolerate conditions for more debt acquisition to bid up financial assets.

Stock markets are about G-R-O-W-T-H or about liquidity credit and confidence? 

For the Phisix: Will team OPLAN 7,400, with their fantastic manipulation of the index, see their wish fulfilled for a new historic high today?