Global equity markets plunge after Draghi signals no action this year

Thursday, December 04, 2014

Global equity markets reversed recent gains and slid lower in today’s trading session after the ECB lowered its growth forecast for 2015, confirming ongoing concerns about the slowdown of the European economy.

ECB’s President Mario Draghi said that the central bank will reassess stimulus measures early next year, adding some pressure to equity markets as investors were seeking a possible earlier commitment. The ECB predicted inflation to be around 0.5% in 2014 and 0.7% in 2015, with an estimate of 0.8% growth this year and 1% in 2015, below the previous estimate of 1.1%. In addition, the Bank of England and the ECB kept interest rates unchanged, as expected. The German Markit construction PMI climbed to 53.5 in November from 51.5 in October, verifying signs of improvement of the German manufacturing and industrial sectors. On the other hand, ILO unemployment in France rose to 10.4% in Q3 2014 from 10.2% in Q2 2014.

The euro opened at 1.2311 this morning and rallied towards 1.25 against the USD after the ECB announcement.

EURUSD 

EURUSD Curncy (EUR-USD X-RATE)   2014-12-04 16-39-15

In the US, Challenger layoffs fell by 20.7% in November compared to a 11.9% rise in October, suggesting improving employment conditions of the US economy. Furthermore, weekly jobless claims fell to 297,000 last week from 313,000 the week before, while the main focus will now turn to the release of the US non-farm payroll data tomorrow.

The USD index reversed earlier gains and slid lower below 88.3 following Mario Draghi’s speech, offering some support to base metal prices. Crude oil prices continue to remain under heavy pressure with WTI front month futures falling towards $66 per barrel.  

USD index

DXY Curncy (DOLLAR INDEX SPOT)   2014-12-04 16-40-11

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