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Morning Report

The market was hoping for more from Mario Draghi yesterday, but the head of the ECB didn’t deliver.

Expectations were for a bolstering of an already pretty hefty QE stimulus package, increasing the monthly amounts and expanding the range of assets. Mr Draghi, perhaps buoyed by decent PMI numbers out of France earlier in the day, was less dovish than hoped though and only said that this would be considered if inflation expectations weaken further.

So no immediate action, but with commodity prices feeding disinflation, it may not be a million miles away. Zerohedge also points to another catalyst for disinflation; Volkswagen. According to the article, VW’s massive inventory and imminent collapse in global sales means that they’re raw materials orders are going to drop significantly. Last year they sold 600,000 cars in the US – we’re not sure how much steel and aluminium that equates to, but it’s an awful lot – and employs some 270,000 people. Something’s got to give.

The Telegraph reports that Angela Merkel’s government turned a blind eye to the emission rigging, when they were warned months ago of what went on – though VW weren’t mentioned by name when the government were briefed on ‘defeat devices’ – oh dear.

Bloomberg is reporting that Russia is prepared to go it alone against IS, if the US are not willing to join strike action. Mr Putin is planning to mount strikes from within Syria in a move that would be key to gaining a foothold in the region. Apparently Russia is willing to look at a transition away from the Assad government -a key point for America – once things are stabilised, but ‘once’ is a very vague time-line in any situation where a country has gone in to ‘stabilise’ or ‘liberate’ any country in the Middle East.

Deutsche Bank have an interesting point of view on the Fed’s interest rate dilemma, saying the Fed is entirely market driven and won’t risk raising interest rates until the market is “begging for it”. They say the Fed won’t risk flying in the face of markets and such a position could mean that rates won’t go anywhere until 2017… so any hopes of the ‘will they won’t they’ debate being put to bed this year might be wishful thinking.

Overnight we’ve seen Japan come back to their desks for the first time this week to a fairly hefty market sell-off. The Nikkei, down 3% is the biggest loser, whilst Australia’s ASX paints a different picture and is up 1.5%, but this is mostly due to a rebound after prices closed at their lowest level since July 2013.

European markets have opened lower, probably as a bit of a continued reaction to the Draghi disappointment, though VW is up by 5% in early trading. German IFO data is the one to watch in this morning’s session.