By Geoffrey Smith
Investing.com — Europe’s stock markets have opened mostly lower Thursday on a day when the European Central Bank is widely expected to present the case for more monetary stimulus at the meeting of its policy-making governing council meeting.
Even bank stocks are finding it hard to get excited, although Spanish and Italian banks, which need the ECB’s safety net more than their French and German counterparts, have outperformed a little this week as the prospect of new, ultra-cheap long-term loans has come into focus.
There are reasons for the lack of enthusiasm: first, the overall market has risen 11% so far this year without much of a correction, so the air is getting a bit thin.
Second, it’s now clear that, for bank stocks, money-laundering issues matter as much to the investment case for some banks as the policy backdrop. Non-euro-zone Swedbank (ST:SWEDa) is down after activist Bill Browder filed a criminal complaint against it, while ING (AS:INGA) is down another 1.4%, and is down nearly 7% this week. Raiffeisen Bank International (DE:RBIV), the Austrian bank that came off worst in the so-called Troika Laundromat disclosure dump, is doing a dead cat bounce, up 0.7% after shedding 15% over the previous three days. Deutsche Bank (DE:DBKGn) is down 1.6% for a different reason, as reports that it has cut its bonus pool for 2018 cast more doubt over its ability to keep star performers in its underperforming investment bank.
Finally, there’s no getting away from the poor growth outlook. The ECB is likely to cut its GDP forecast for this year sharply from its last estimate of 1.7%. The OECD’s new forecast, released on Wednesday, is for only 1.0%. Bloomberg cited sources close to the ECB as saying Wednesday that the revisions will be sharp enough to justify a new round of long-term refinancing operations, or LTROs, but its sources shied away from saying that they would be announced today.
As always, there are individual bright spots out there: French advertising group JC Decaux (PA:JCDX) is up nearly 5% after stronger-than-expected earnings, but German media giant Axel Springer (DE:SPRGn) is down over 7% after forecasting a weak 2019, while most things with exposure to the China story are under pressure after Huawei sued the U.S. over its exclusion from public-sector procurement tenders.
There are some things for which even Mario Draghi doesn’t have the answers.