We got a reminder that it's not just oil that could move our markets this morning--Europe can also have an influence.
Shortly after 10 AM ET, Reuters published a story indicating there may be more opposition to ECB head Mario Draghi's easing program--and to his management style--than was previously thought.
There are 24 members on the Governing Council, six on the Executive Board (who essentially run the bank) plus governors of central banks from 18 countries. Those central governors are the ones who seem most irritated.
It's well-known that the Germans--led by Bundesbank President Jens Weidmann--were pushing back on Draghi's plans. But opposition from other members--on style or substance--could be a major headache for Draghi and shake confidence in the market as to Draghi's ability to get his program through the ECB.
What the article highlighted was that Draghi is being too autocratic, and that he has been revealing too much of the ECB's internal discussions. They seem particularly unhappy that he revealed he was going to increase the balance sheet by a trillion euros in order to buy asset-backed securities and covered bonds, when everyone seemed to believe that Draghi would not talk specific numbers.
That's a style issue, but there is a bigger substance issue: perhaps 10 of the 24 members may be against Draghi's plan for U.S.-style quantitative easing. Partly this is philosophical, but there is also a difficult execution issue. It is difficult for the ECB to replicate the central banks that exist in the U.S. and Japan. Simply put, they don't have a single, fluid bond market like the U.S. and Japan. If the ECB starts buying sovereign debt, whose will they buy? Will the French say, why are you buying so much Italian paper?
Bottom line: these battles shake the confidence of the market as to whether Draghi will be able to get anything done. If they clip his wings as to what he is able to say, or what he will be able to do, that will reduce the ability to divine what Draghi's intentions are.
Europe weakened when this article came out, and even our markets started drifting south.