FAQ: #Qemania- What does it mean for European companies?

The ECB has announced its first round of Quantitative Easing (QE) with monthly purchases of EUR60bn of ABS/covered and public bonds (EU institutions, agencies and government) until at least September 2016, with any extension dependent on the inflation outlook.

Too little too late? The ECB is late to the QE-party, when compared to the Fed or the BoE. Investment and company turnovers are depressed. We estimate there is EUR2000bn missing in action. Further, it will take some time to unleash the nominal effect. "It's the [price] stupid!"

What does it mean for the real economy? We expect a positive, but limited impact circa +0.5pp of GDP growth and +0.3pp on inflation over the next 12 to 18 months. For corporates this will mean a gradual easing in financing conditions and less pressure on pricing and turnovers. Coupled with a weaker euro (forecast at 1.12 in Q4 2015), and lower oil prices, European companies' margins could get a full +1pp boost in 2015-16.