There was quite a bit of concern about whether Signore Draghi taking the reins at the European Central Bank (ECB) would lead to a much looser regime that would ignore inflation. In the first instance he is an Italian central banker, who historically have been known to have no qualms about allowing significant amounts of inflation. While he has been personally committed to far more fiscal rectitude than any of his Italian predecessors, that still left a question in the air.

Especially so at a time when Italy is going to need seemingly massive help with its sovereign debt problem. There was some passing concern (nothing really too serious) that he might be overly accommodative in supporting the Italian government bond market through ECB purchases. And all of that was seemingly compounded by the first interest rate decision under his regime yesterday, as the ECB put through a surprise 25 basis point rate cut to 1.25%.

Horror of horrors? Well, not really. Along with the rest of the world, European inflation does remain very high at present. As such, an easing ECB seemed to be joining Fed Liquidity Lubrication Club. However, in the context of the recalcitrant rate rises into an obviously weakening European economy by hawkish predecessor Jean-Claude Trichet, the reversal of one of those hikes hardly makes Signore Draghi an inflation Dove.

In fact, the economic data all seems to have vindicated his decision to make a bold move at his first interest-rate meeting as ECB President. As events have evolved today at the G20 meeting in Cannes, he has also rejected the idea that the ECB should continue purchasing the sovereign bonds of Europe's weakest fiscal sisters. In that regard his indication that the Euro-zone needs to get its European Financial Stability Facility (EFSF) act together (funding, mandate, leveraging mechanism) is wholly consistent with that of his predecessor. On the whole, a very solid showing.

However, whether the ECB has turned just a bit more dovish is the least of the equity market's concerns. The now bizarre machinations in Greece, and more importantly the continued lack of agreement on the critical funding and operational aspects for EFSF are plaguing the markets today. The biggest problem seems to be recurring failure of lofty pronouncements followed by no credible details on all of these various rescue at fiscal reform plans. And once again at the G20 in France, it is all starting to feel like not much more than a Cannes-game!!

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It was a very interesting final ECB press conference for John-Claude Trichet. The estimable ECB President is retiring at the end of the month, and used today's press conference to effectively focus on some themes related to who has been effective and who has been remiss in Europe.

The ECB holding its base rate study today at 1.5% seems that much less sensible in the wake of his opening statement assessment that second half Euro-zone growth would indeed be lower-than-expected. Reconfirming the recent ECB shifts to presuming intensified risks are on the downside, and the suggestion that banks should retain more earnings as reserves, would all seem to suggest that the central bank should be easing instead of holding steady at what appears to be a premium yield in the face of falling commodity prices.

However, as noted in our analysis earlier this morning, we suppose that he did not want the embarrassment of refuting that anti-inflation stance by actually cutting rates today. He might also figure that another 30 days won't make much difference as he turns over the reins to Signore Draghi. We shall see.

However, what he had to say about the fact that roughly half of his eight year tenure has been spent addressing markets in turmoil was the far more interesting aspect.

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We certainly hope not. And it's possible equities already discounted the impact of what is likely to be a lack of explicit QE2 commitment by Mr. Bernanke today at Jackson Hole. The further challenge facing traders and portfolio managers is while the discussion of what the Fed Chairman might say has been ubiquitous, it's possible it has already been built into the market on yesterday's late session slide.

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In spite of the degree to which the shenanigans in Washington DC regarding the fiscal situation and US government debt ceiling are perceived to be critical for the government bond markets and equities, the most important recent development is the degree to which the consensus on the future path of the global economy has become far more negative of late. We have been very confident that this was indeed the case, due to the rapidly developing economies’ overt attempt to tackle their inflation problem.

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And there is not much of a surprise in that, due to two key factors that are either in flux, or will likely remain negative overall regardless of the immediate US Debt Ceiling Crisis being addressed. The first is the compromise that was crafted over the weekend is yet to be approved by the full US House and Senate. And there are no small number of dissenters on each side that might stretch out that process to a degree that still leaves the debt ceiling as a dilemma. However, even if that is settled for now (allowing it includes a rather critical contingency plan), the other factor remains whether solving any of these near-term crises (Europe included) amounts to anything that will actually rejuvenate the global economy.

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