European equity markets managed to hold on to early gains during the last session of the week with most major benchmark indices posting healthy gains throughout the day. Market participants were offered some relief towards the end of the week after comments from St Louis Fed President James Bullard suggested that the Fed may want to continue its asset purchase programme beyond October in an effort to combat a falling inflation outlook. The comments saw both the S&P 500 and DJIA recover early losses yesterday as risk appetite slowly returned.
Markets gained further support for the relief rally today after the Bank of England’s chief economist Andrew Haldane, who had previously been neutral over the summer regarding a potential interest rate rise, stated that he was now in favour of delaying the move. Market participants had increasingly grown cautious of an impending rate rise on both sides of the Atlantic and when combined with a slowing growth outlook in Europe and China and the ongoing threat of deflation many had opted to sell their holdings, taking a flight to safe haven assets which promptly saw the yen strengthen against the dollar and spot gold prices recover some of September’s steep losses.
The dollar index firmed just above 85.100 towards the end of the European session as risk appetite saw both the S&P 500 and DJIA recover around 1.0% at the time of writing. The rally gained further traction from the release of better than expected US housing starts, which increased 6.3% in September from a 12.8% decline the previous month while the University of Michigan confidence index beat expectations of 84.0 in October, coming in at 86.4. Hopefully the coming week will see a semblance of calm, far from the choppy trading we saw this week.