Market remains convinced that the ECB will extend its asset purchases - BBH

Research Team at BBH, suggests that despite the backing up of rates, the market remains convinced that the ECB will extend its asset purchases. 

Key Quotes

“Most of the increased price pressures in the Eurozone likely reflect the recovery in oil prices.  The flattish core rate below 1% reflects this.  In addition, the recovery in lending seems to stall at a subdued pace.  Lending to non-financial companies grew 1.9% year-over-year in September, unchanged from August.  Similarly, lending to households remained stuck at 1.8%.  M3 growth itself slowed to 5.0% from 5.1%

While the ECB is widely expected to announce its changes at the December meeting, the BOJ's Kuroda all but said not to expect any action next week.  Kuroda indicated that it might not need to buy JPY80 trillion a year to keep the 10-year bond yield near the zero target.  Separately, local press reports continue to play up the likelihood that the BOJ pushes out when its inflation target will be reached again to FY2018.  It seems that rather than a date-specific guidance, the BOJ (and investors) would be better served by keeping it vague like the US "medium term" or the UK's rolling two-year framework.  The ECB talks about achieving its target as quickly as possible.  The BOJ keeps finding itself in a position whereby to maintain its credibility, it is stretching it needlessly. 

The widespread criticism that the easy monetary policy and negative interest rates asphyxiate banks may be a bit exaggerated.  At least four large banks reported earnings today (Deutsche Bank, Barclays, Nomura, and BBVA) and they all did better than expected.  Deutsche Bank, for example, surprised markets by reporting a profit in Q3. One thing that they had in common was that trading profits had been an important contributor.  The reports, however, were not sufficient to prevent heavier stock prices.”