Investors Brace For Big Week
This upcoming stretch in the financial markets is a big one for European investors, according to the Wall Street Journal.
Thursday, January 22, 2015 - 00:00
On Thursday, the European Central Bank will meet and unveil its plan for quantitative easing. Then on Sunday, Greece will hold its snap election to determine the fate of its Parliament – and possibly its status as a member of the eurozone. It is essential for investors to navigate this terrain with caution, as uncertainty looms.
As a result, European stocks halted their 4-day streak of gains, remaining steady on Wednesday, reported MarketWatch. The benchmark Stoxx Europe 600 moved between gains and losses. The FTSE 100 of London gained 0.6% as Germany’s DAX 40 and France’s CAC PX1 both lost 0.4%.
ECB poised for QE
Most investors feel the ECB will announce a government bond purchasing program, known as quantitative easing, on Thursday. According to The Wall Street Journal, 70% of economists polled are confident that QE will soon be underway, though forecasts for the size of that program vary from 500 billion to 1 trillion euro.
“We expect that the ECB will announce a purchase program of around EUR500 billion which could disappoint as many investors appear to be hoping for more,” Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management, told MarketWatch.
Additionally, those same economists polled by The Wall Street Journal predicted the euro would fall further than the dollar, tagging $1.10 per euro as the target level. More than 60% said they would sell on a euro rally, while less than 10% indicated they would buy.
Greek exit possible, still unlikely
After the ECB announces its QE policy, investors will turn all their attention to the snap election on January 25 in Greece. Leftist opposition party Syriza leads in the polls, as per a survey from Greek newspaper To Vima. Some analysts are concerned that a victory for Syriza would lead to a Greek exit from the eurozone – a move that would shake up the ECB and European markets at large.
However, it is still far from guaranteed that any such move would occur – both sides would likely work to come to a compromise, as it may be in the best interest of both Greece and the eurozone to remain together.
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