Global markets drift lower on dovish ECB comments

Thursday, January 09, 2014

European equity markets drifted lower today after yesterday’s mixed trading session after rates decisions and comments from the ECB and BOE as well as the FOMC meeting minutes released yesterday prompted investors to take flight on a round of profit taking. Most European indices had posted steady gains throughout the morning after a tentative start as industrial production in Germany accelerated to 1.9% m/m in November against a 1.2% contraction the previous month and 1.5% expected by market participants.

The final reading for eurozone consumer confidence came in as expected at -13.6 as the lack of adverse surprises supported markets higher and confidence rose to its highest level since July 2011. However, the PM session saw most major European indices reverse those early gains as both the ECB and BOE announced that their respective base rates would remain unchanged at 0.25% and 0.5% respectively.

Subsequent comments by ECB President Mario Draghi  highlighted concerns of persistently low inflation which is currently at 0.8%, well below the central bank’s target rate of 2%, and further warnings regarding the risks to eurozone recovery. Germany’s DAX and France’s CAC lost 0.8% and 0.89% respectively.

London’s blue chip index closed lower for the second consecutive session despite opening slightly lower as an early morning recovery paved the way for gains towards 6,740 after trade balance figures came in largely in line with expectations and eurozone data encouraged investors.  

However, the cautious tones from the ECB quickly led to a reversal as the index closed 0.45% lower. A string of bearish Christmas sales updates from Tesco, M&S and Morrisons also cast a contradictory light on an otherwise bullish UK economic outlook.

Over in the US, despite an encouraging initial jobless claims reading for the week ending January 4th, which saw claims fall by 15K w/w to 330K which was 5K below analyst expectations. Both the S&P 500 and DJIA were trading between 0.2% and 0.3% lower as investors absorbed the dovish comments from the ECB and looked towards non-farm payrolls data for further justification of current, near-record stock market levels. 

Initial jobless claims decline by 15K w/w

INJCJC Index US Initial Jobless 2014 01 09 16 38 06

Eurozone consumer confidence improves to highest levels since July 2011

EUCCEMU Index European Commissi 2014 01 09 16 45 32

Topics: DJI, SP 500, Equities, ECB, BoE
More from: Kash Kamal