Quantitative Easing has succeeded in raising European indices. Is this about to end?

As speculation about the ECB's plans for monetary policy tightening increases, it is worth pointing out that in the era of quantitative easing, only a few of the stock indices in the region have outpaced the high figures seen before the global financial crisis. The UK FTSE 100 index achieved this success in 2015, followed by the Stoxx Europe 600 index. Germany's DAX index, which includes dividend payments unlike most competitors, peaked after ECB President Mario Draghi announced first time its plans to buy bonds in January 2015.

In view of the upcoming ECB meeting and the expected cuts in the QE program, it is very likely that we will see a decline in the European indexes as much of the ECB's purchases are focused on corporate bonds. The ECB is considering part of the bonds in question being sold to private banks that will impose a higher interest rate on them, and companies will therefore pay a more expensive loan price. This will lead to a difficult implementation of company plans and a bad impact on the stock.

Source: Bloomberg Pro Terminal

Jr Trader Petar Milanov

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