How did the industry react to QE?
A day after European Central Bank president Mario Draghi unveiled details of a €60bn-a-month asset purchase programme, a European quantitative easing (QE), IPE rounds up reactions from across the Continent to find out if the intervention will be able to pull the single currency out of its disinflationary spiral
John Vail, chief global strategist at Nikko Asset Management
Fortunately, the ECB positively surprised the market in most every way. It is a historic day for central banking in Europe and, therefore, for the world, too, even if one thinks the economic effects will be marginal. In a sense, the ECB is now the most aggressive central bank in the G-3, as it has both negative policy rates and sovereign QE, but there are some factors to consider going forward.
Andrea Beltratti, chairman at Eurizon Capital
The ECB has sent a strong signal, but it was inevitable at that point, particularly given the anticipation of the equity and bond markets. It is the logical conclusion of the ‘whatever it takes’ rhetoric Draghi initiated almost three years ago.
Martin Steward, investment editor, IPE
It’s early days, but if this more optimistic take on things sticks over the next days and weeks, we could be seeing the beginnings of what could be a powerful bull market in European risk assets – but perhaps not the long-overdue and much-needed correction in safe-haven rates.
Mark Burgess, CIO at Threadneedle Investments
There has been some discussion about the lack of ‘mutualisation’ or risk sharing of the government bond purchases, but we feel the important issue is the commitment from the ECB to expand its balance sheet.
Risk sharing was always likely to be a stumbling block, particularly given strong German opposition to the idea, but it should not reduce the effectiveness of the policy in terms of addressing short-term growth and deflation concerns. Importantly, German policymakers have not questioned the legality of the ECB’s decision to implement sovereign QE, although it is clear many Germans do not like it.
Andrew Sheets, Phanikiran L Naraparaju and Serena W Tang of Morgan Stanley Research
We view the size as a positive surprise versus market expectations. More risk-sharing would have been better in our view, but at least there was some. The decision to allow buying out to 30-year maturities came as a surprise to markets. Combined with a larger-than-expected buying programme, we’d expect 30-year Spain to outperform.
Jon Jonsson, senior portfolio manager at Neuberger Berman
Overall, the announcement takes a constructive step in repairing the credibility of the ECB. We anticipate that the impact should generally be positive for risky assets within fixed income, prompting a tightening of spreads in peripheral sovereign markets, as well as European corporate credit. Equities, in turn, are likely to rally on a better economic outlook.
Dennis van Ek, actuary at Mercer in the Netherlands
The causes of the currently low rates – low inflation, as well as the ECB’s policy of suppressing rates – are still present. The purchasing programme will amplify this effect.
Filippo Battistini, head of institutional and fund buyers at Allianz Global Investors in Italy
The traditional carry strategies will no longer be sufficient. There is a potential for more flexible asset management strategies to gain ground, ones that include new alternative asset classes in the fixed income space and are complemented by hedging with derivative instruments.
Maria Paola Toschi, global market strategist at JP Morgan in Italy
The QE decision could initiate a very favourable period for the European economy, including firms and investors. The bond-buying programme should continue to put pressure on peripheral spreads, thus creating positive conditions in terms of debt obligations.
We are convinced the ECB announcement and its implications for a weakening euro, coupled with a stable rates environment, could lead to potentially significant change in Europe. This makes us confident Europe will be one of the most promising investment themes of this year.