While investors are currently taking a breather from stresses in the eurozone, European worries nonetheless hover ominously in the background of all the optimism right now.
And as we look forward to the last big European Central Bank liquidity operation for the foreseeable future, many investors are already predicting that we're on the verge of a reversal in the positive sentiment we've seen so far this year.
These next momentous events could fuel or mitigate those worries.
Wednesday, February 29
The European Central Bank will announce the results of its second—and at this moment final—three-year long-term refinancing operation, in which banks will receive super-cheap funding on riskier collateral than they have done in the past.
In the first LTRO, they borrowed €489 billion ($655 billion) from the central bank on a three year basis. Analysts currently expect them to ask for a similar amount this time around. The results of this funding exercise will probably have a large impact on market sentiment, which most expect to move negative in the wake of the final LTRO.
Wednesday, February 29
Finland votes on the terms of the second Greek bailout. While the Finnish parliament is likely to approve new support measures for Greece, rumblings about Greece not meeting its spending and privatization targets has marred solidarity on the bailout.
Thursday and Friday, March 1-2
EU leaders will meet in Brussels for their latest summit on eurozone worries. The progress of the Greek PSI deal will probably be discussed, however the focal point of the meeting will probably be talks to expand funding for the European Stability Mechanism—the permanent European bailout fund set to go into effect in July.
Right now it has €500 billion ($670 billion) available, but investors have long argued that much more money is needed in order to properly reassure investors that contagion stemming from a Greek default and other shocks is under control. Germany has vehemently promised that this won't happen, however, so what we will likely see is an escalation of intra-eurozone tensions and little progress.
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See Also:
- A Complete Guide To Greece's Selective Default Next Month
- All The Details On The Major Hit Greece's Creditors Are Going To Take
- S&P DOWNGRADES GREECE TO 'SELECTIVE DEFAULT'