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.