After $7.8 Trillion Got Wiped Out in three Weeks, “Global Stocks Surge Most since 2012”

Nothing goes to heck in a straight line.

By Wolf of WOLF STREET

Investors found some relief on Friday after getting flogged on a near daily basis since the miserably short and feeble Santa Rally ended on December 30. The bounce off the dreadful lows on midday Wednesday in the US carried through. Finally! We’ve been expecting this rally. We’ve been waiting for it. Nothing goes to heck in a straight line.

“Global stocks surged the most in 3 1/2 years, as US equities joined a rally that pushed oil to its best two days since 2009 on speculation that central banks will expand stimulus measures to counter turmoil in financial markets,”Bloomberg gushed.

So on Thursday, ECB President Mario Draghi said the magic words everyone wanted to hear: the ECB would “reexamine” its already massive QE program and its absurd negative deposit rate. That was enough. More stimulus is now expected in March. Central-bank optimism took over: central banks will stop this totally unfair bloodletting!

Then on Friday in Davos at the World Economic Forum, where he was hobnobbing with the world’s financial, corporate, and political chieftains, Draghi suggested that the ECB wasn’t, in fact, out of ammo. OK, major Eurozone stock indexes were in a bear market despite or because of QE, but hey, there could always be more QE.

“We have plenty of instruments,” he said in his inimitable Draghi speak. “We have the determination, and the willingness, and the capacity of the Governing Council, to act and deploy these instruments.”

“We are not surrendering” to global pressures, he said as he was surrendering to global pressures by promising markets what they wanted.

Bank of Japan Governor Haruki Kuroda was also in Davos, soothing rattled nerves and indicating that more money-printing was always a possibility. And China’s Vice President, Li Yuanchao, said that China would keep meddling in the stock market to “look after” investors.

That’s what markets needed, some assurances and a little prod. By Friday, it was party time

Continue reading the article at WOLF STREET

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