Global Markets Brace for the End of Fed Stimulus



“Recent confidence indicators based on survey data have shown some further improvement from low levels and tentatively confirm the expectation of a stabilisation in economic activity.”

Mario Draghi, president of the European Central Bank, said the above in a statement to the press on August 1. In effect, it suggests that if you’re an optimist, the European Union has just barely tripped into a recovery. News that flash estimates of second-quarter gross domestic product showed 0.3 percent growth in both the EA17 and EU27, the first positive action in six quarters, has in fact helped improve sentiment.

However, Draghi’s consistently middle-of-the-road comments leave room for pessimism, too. The growth experienced in the second quarter could very well just be a momentary reprieve, downwardly revised based on additional data or simply punctuated in a broader, full-year decline.

For its part, the ECB — or Draghi, at least — seems to believe that the economy will perform according to forecasts in the second half of the year. Those forecasts currently call for full-year economic contraction of 0.6 percent followed by 0.9 percent growth in 2014.