(29 OCTOBER 2017)THE ThOUGHT OF WEEKEN: How will markets react to ECB tapering?

As expected, on 26 October the European Central Bank announced a further reduction in the pace of its monthly bond purchases to EUR 30bn from EUR 60bn and extended the program by nine months. In reaction, the Euro Stoxx 600 gained 1.1%, while the euro fell 1.4% versus the USD.

Taken at face value, a move toward monetary tightening might have been expected to support the euro and be negative for equities. But we at CIO believe the market’s initial reaction – in the opposite direction – makes sense:

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