Good morning,

Markets are firmly up this morning after the ECB President Mario Draghi gave investors further hope that the ECB will adopt a form of expansionary monetary policy not to let the Euro area fall into a Japanese style deflation. In the past the ECB has failed to delivered and this can be seen in the low inflation and growth rates in Europe. This time round it is different because in the first half of 2013, the Euro area fell in recession. The last thing the ECB wants in for the Eurozone to go back into recession. And the growth forecasts going forward are not convincing. They are still very low which means that the probability of this happening is high. Citigroup lowered the euro area GDP forecast for 2014 from 1.1% to 0.8% in 2014 and from 1.7% to 1.5% in 2015.

Inflation figures for August start coming out this week. On the 28th August, the Consumer Price Index for Spain and Germany will be published. On the 29th August we will then get the inflation figures for the Eurozone. With euro-area data this week poised to show the weakest inflation since 2009, the ECB president used the high-profile central banking conference in Jackson Hole, Wyoming, to warn that investor bets on prices have “exhibited significant declines.”

Having said this, analysts are seeing opportunities in European equities. Raiffeisen Capital Management is adding to holdings, with earnings at DAX Index companies poised to rise 21% in 2014, according to more than 1,000 analyst estimates. JPMorgan Chase & Co. and ABN Amro Bank NV say valuations are compelling after the Ukraine crisis sent Germany’s benchmark gauge to 13.2 times projected profits, close to the cheapest level relative to Europe since at least 2005. Stocks in Germany, which has more trades with Russia and Ukraine than any other country in western Europe, are down 2.2

percent this year, compared with a gain of 2.6 percent for the Stoxx Europe 600 Index.

In the US, the situation is different. Federal Reserve Chair Janet Yellen said at the Jackson Hole conference that the U.S. labor market has made considerable progress, though too many Americans are still out of work. Fed officials are slowing monetary stimulus and debating when to exit from ultra-loose policy.

In corporate news, Burger King Worldwide Inc., the second-largest U.S. burger chain, is in talks to buy Tim Hortons Inc. and move its headquarters to Canada, becoming the latest American company to seek a relocation to a lower-tax country. Burger King, which is majority-owned by 3G Capital, would create the world’s third-largest fast-food chain by merging with Canada’s bigger seller of coffee and doughnuts, the companies said in a statement.

Roche Holding AG, the world’s largest maker of cancer drugs, is strengthening its portfolio of medicines for respiratory ailments with an agreement to buy InterMune Inc. for $8.3 billion in cash. Roche will pay $74 a share for InterMune, an unprofitable biotechnology company that’s awaiting U.S. approval of its biggest drug, the Basel, Switzerland-based company said yesterday in a statement. The agreement reflects Roche’s confidence in pirfenidone, potentially the first drug in the U.S. for a rare lung disease that typically kills in five years.

Good day and happy trading!

Kristian Camenzuli