A strong rally in European equities

Thursday, June 05, 2014

European equity markets rallied strongly in today’s trading session after the ECB cut all three interest rates at its policy meeting, while ECB’s President Mario Draghi reaffirmed that the Bank is ready to take further action to support the Eurozone’s economy, if necessary. The CAC and IBEX indices surged between 1% and 1.4%, while the DAX and the London equity benchmark index fluctuated ending fairly unchanged on the day.

The European Central Bank cut its main refinancing rate to 0.15% from 0.25%, while its deposit facility rate fell to -0.10% from zero and its marginal lending facility declined to 0.40% from 0.75%. The euro initially plunged to test a low at 1.35 but rebounded in late trading as market participants digested the news. President Draghi reported that the Bank will act swiftly with further monetary easing, if required.

In the UK, the Bank of England kept interest rates unchanged as widely expected, while data from Halifax indicated house prices rose by 8.7% y/y in May, beating estimates of a 7.4% increase. Sterling rallied further today retesting the 1.68 area, reaching a 1-week high.

Precious metal prices rebounded and Gold breached above $1250/ounce, while Silver also rallied above the $19.0 area. Base metal prices were fairly mixed today, while LME copper consolidated around $6785.

The release of the US non-farm payrolls data tomorrow will draw investors’ attention following the recent mixed US economic data. The USD index is back to the 80.5 area, looking for further direction. 

More from: Myrto Sokou