ECB Rate Cut Surprise Boosts Global Equity Markets

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Sept. 3 (Bloomberg) -- Bloomberg's Joseph Ciolli and Olivia Sterns examine global market reaction to the European Central Bank’s unexpected cut of the benchmark rate to 0.05 percent. They speak in "On The Markets" on Bloomberg Television's "In The Loop."

Means, joe has been following this all morning.

This was a surprise interest-rate cut for mario draghi.

What kind of reaction are we seeing for equity markets?

Last we saw in equity markets over the last half hour, we will be seeing a lot more liquidity in the market and banks will have more equity in capital.

It will help people allocate equities.

Is the reaction you're seeing suggesting investors will be surprised by this?

Yes, i think people were surprised by the fact people -- we went to negative deposit rate.

We have also seen an asset-backed security program.

Aggressive quantitative easing.

People might be -- you are expecting something.

I do not know if they expected some the to this degree.

Only mario draghi knows if they are expecting more.

I would imagine if he doesn't get the intended result right away, we may see hints at it.

He does not like to do things right away.

He likes to hit added weeks or months.

It looks like this might be a stopgap before a more full-fledged quantitative easing.

Interesting to see mario draghi signaling that there was unanimous agreement that they remain committed further to unconventional measures.

Also come a decision to cut the interest rate was not unanimous.

Some board members of the ecb wanted to do more in terms of market reaction.

What sectors are feeling the biggest boost?

A big boost in a lot of the energy and the banks and those more directly tied to liquidity in the market.

Might see a pullback in utilities.

You said the overnight rate was the biggest surprise.

What is the impact for the market?

Is there a risk this could increase financial instability?

The right now, what is it?

-.1. that is incredible.

You have to pay the ecb for the privilege of stashing your cash there overnight.

There are research analysts who have gone on record saying we will see increased volatility's. it is time to put up or shut up and maybe the market will do that.

Right off the bat today, we did not see much of a reaction.

It spiked up and we have definitely seen early sign of volatility.

Euro stoxx 600 up by 1.5%. the biggest gain coming, 1.8%, up by 1.6 percent.

Again, something i am very excited about but probably a lot of americans are not because they have taken european holidays already for the summer, the euro has fallen.

Thank you so much for joining us . market makers is up next.


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