Europe returns to focus upon Eurozone monetary policy

• Markets lower after buoyant Friday

• Europe returns to focus upon Eurozone monetary policy

• Mario Draghi set to address the European Parliaments

Global indices are looking to start the week on a somewhat softer tone, with the Asian markets leading the way lower overnight. Following the excitement of Friday’s Scottish referendum and Alibaba IPO, things have come down with a bump, especially in China and Japan where a fall in commodity prices hit valuations. Europe is subsequently looking for a negative open, with the FTSE100 -25, CAC -32 and DAX -67 points.

A somewhat quiet start to a quiet week in stall today, where the European markets have to realign their thought processes following a scare last week where polls started pointing towards the possibility of a move to independence for Scotland. With the existence of further regions (such as Catalonia and Bavaria) who just like Scotland were seeking to form breakaway states, it is believed that Friday’s result should go some way to putting to bed the idea for some of these other regions too. Thus the emphasis within the Eurozone is likely to shift back towards the norm, which is an ongoing picture of low inflation, low growth and ineffective monetary policy. The recent shock announcement that Mario Draghi’s much heralded TLTRO programme had only seen €82.6 billion in takeup from the major banks, despite a possible total allowance for the first two rounds of €400 billion. This has put pressure upon Draghi should we not see an increased interest at the December round.

Over the weekend, US Treasury Secretary Jack Lew called out Europe and Japan as two regions which were holding the world back and called upon them both to do more to spur on growth and help the global recovery. This highlights the importance of success for Mario Draghi and increasingly there appears to be less and less options but to implement a fully blown quantitative easing programme in the near future. The introduction of the ABS scheme at the last ECB meeting is essentially a halfway house to such a step, yet the importance of a QE scheme is as much in its name as anything else given the now commonly known implications for jobs, growth and asset prices. It is evident that until Draghi takes that step, there will always be indecision and mistrust of the direction of the Eurozone and that leads to weak investment and a lack of prospects.

The European focus for the day will be geared towards a speech from Mario Draghi in the afternoon. Draghi’s testimony in front of the European Parliament’s Economic and Monetary Committee should make for an interesting watch, with monetary policy set to take centre stage yet again. There is likely to be an interest in the inability of previous measures to spur on growth in jobs, output and inflation, which is sure to bring the question of what else can be done to do exactly that. Therefore markets will be well aware of the possibility for major volatility in during Draghi’s testimony as everyone awaits those two little letters, ‘QE’.