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It was four years ago this week that Jean-Claude Trichet and the European Central Bank first rode to the aid of financial markets.

Little did most pundits, or probably even the man himself, imagine then that the ECB would still be waging war against the forces of fear and illiquidity four years on.

On Tuesday the ECB will offer its first six-month loans in more than a year while on Monday, it waded into the vast Italian and Spanish government bond markets.

Those countries’ bonds jumped sharply but elsewhere, signs of success for the ECB’s renewed campaign were thin. Interbank funding measures remain elevated, and use of the ECB’s own overnight deposit facility – where banks can park cash at penalty rates - is at 6-month highs, implying banks would rather hoard than lend. More generally, stocks have slumped in the stampede for Treasuries, German bunds, the Swiss franc and gold.

It would be easy to dismiss the violence of these moves as mostly simple panic but this is wrong. They are extreme, but they also reflect an ongoing, more fundamental scaling back of growth hopes following the recent slew of poor data.

Take gold priced in Australian dollars. Gold reached a nominal record on Monday in US dollar terms, up about 5 per cent this month, because of its haven status. However, gold in Aussie terms is up more than 11 per cent this month, reflecting the sheer scale of both factors together – the growth cutbacks and the haven search.

Mr Trichet’s 2007 actions earned him plaudits but the somewhat dismissive market reaction to the ECB’s latest moves shows how investor expectations have grown

Next to feel this will be the Fed, meeting on Tuesday. The US central bank has a habit of doing very little in early August, preferring to wait until after its Jackson Hole symposium later this month. This year, markets may not allow it that grace period.

James Mackintosh is away

Copyright The Financial Times Limited 2017. All rights reserved.
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