Good Morning,

This time last week, markets were happily grappling with the notion that the Bank of Japan had announced a fresh wave of asset purchases only a few days earlier, eagerly awaiting the ECB’s next move. A few days later, after the Bank of Japan surprised markets with a marked expansion of its asset-purchase programme, ECB’s Mario Draghi stepped up to the plate and gave markets a somewhat strong signal that additional policy easing was on the way in the eurozone as well.

Draghi’s mention of the need to “closely monitor and continuously assess the appropriateness of its monetary policy stance" coupled with the phrase that the ECB and its sub-committees were discussing the “timely preparation of further measures to be implemented, if needed” indicated that it was now only a matter of time (and not if) the ECB intervened in secondary markets. It was also comforting to note that such high profile sentences were included in the statement and not in the Q&A sessions, which means that Draghi had the backing of the whole entire Governing Council.

Draghi clearly stated that the ECB wants to see its balance sheet increase by €1trn to the levels seen back in March 2012; in order to achieve this, it is almost a certainty that the existing Asset-Backed Securities and Covered Bond programmes will be insufficient and the ECB will most likely have to come up with new forms of assets purchases. Expectations so far remain rife that eventually, the ECB will have to succumb to the idea of purchasing corporate bonds from the secondary markets if it wishes the asset purchase programme to achieve the desired effect, and that is of getting inflationary levels back to the ECB’s “% comfort zone (a far cry away from current levels of 0.4%).

Without a doubt, Eurozone GDP growth data for Q3 will be a catalyst for the case in favour of for further policy action. Following disappoint data last week, analysts seem to have revised their forecasts for Q3 and subsequently Q4 lower as disappointing German and French numbers are expected to skew the regions Q3 GDP print lower.

Across the Atlantic, the mid-term elections have now placed the Republican Party iat the forefront of setting the agenda in Congress. Despite this marked shift in power in the Senate and Republicans gaining more seats in the House, no major shakes are expected on the implementation of fiscal policy. What is positive for the markets, and this was clearly evidenced by the strong sessions succeeding the results of the elections was that the risks of a government shutdown or debt ceiling crisis have been reduced as the objective for the Republicans is now to pass as many bills as possible. On the data front, last week’s employment report indicated yet another strong print in terms of unemployment data.

Meanwhile, the BoE’s inflation report for the month of November is expected to indicate a decline in the Bank’s growth forecasts coupled with a marked downward revision of its near-term inflation estimates this on the back of the weakening of the oil price. On the flip side, the unemployment rate is falling faster-than-expected, which scenario supports wage growth in 2015 and 2016.

This week is expected to be the last of the busy weeks in earnings seasons, as well over three quarter of the major companies in the Eurozone and the US would have reported earnings, with current earnings seasons showing encouraging signs as most companies beat expectations and earnings gained ground. On the data front, we’re heading for a light week. Having said that, some key confidence indices in the Eurozone and the US as well as key CPI figures for some of the large Eurozone countries are expected to set the tone for most of the week, as are the retail sales and jobless claims.

Have a nice day!