Europe There were no surprises from either of the central bank meetings today as stocks continued to push higher after this morning’s better than expected Chinese exports data saw markets open in the green. Sentiment has remained broadly positive throughout the day helped by a well subscribed Spanish bond sale of new and existing bonds. Italian yields have also fallen sharply as the Italian treasury sold €8.5bn of 12 month bills, as investors become more confident in investing in higher yielding Italian and Spanish debt using the "Draghi Put" as their stop loss. This in turn has helped underpin the single currency which got a further boost when ECB President Draghi painted a slightly more upbeat tone to monetary conditions in Europe, as well as the fact that the decision to hold rates was a unanimous one, unlike December, when it was not. Even so gains in equity markets have been tempered by caution over the economic outlook and the guarded nature of Draghi’s and the ECB’s forecast for 2013, with the ECB President citing political risks slowing down the road to recovery and reform. Best performers in the FTSE100 are in the technology sector once again with chip maker ARM Holdings building on recent gains after announcing a licensing deal with Broadcom, giving the company greater access to the US market. Also doing well Bunzl is higher after making a number of new acquisitions which are expected to add about 3% to its earnings potential. The company has also received a number of positive broker comments including an upgrade by Numis. Twelve months ago supermarket giant Tesco’s surprised the market with a profits warning. There were no such fireworks today as the company posted like for like sales growth of 1.8% prompting an upgrade from Oriel Securities. On the flip side of the retail coin Marks and Spencer’s was getting pounded after reporting poor numbers for its Christmas trading period. A drop of 1.8% in like for like sales came in outside of the worst of the estimates, though food remained a bright spot. Primark owner and sector peer Associated British Foods also caught a bit of blowback from the M&S’s numbers, sliding back in sympathy. US US markets opened higher today but still remain below their 2012 lows with the key level on the S&P500 at 1,475 the level to watch. US weekly jobless claims were a slight disappointment rising 4k to 371k, as investors put to one side concerns about the debt ceiling and the dysfunctional US political system and taking the positives from the fact that imports from China rose sharply, suggesting that demand could be starting to pick up. US Wholesale inventories for November also rose more than expected by 0.6%, above expectations of 0.2%. Stocks in focus include carmaker Ford after the company announced it would be hiking its dividend. Facebook shares have also had a good run of late helped by speculation that the company is working on the launch of a phone offering. FX The Japanese yen has remained the weakest currency on the block almost hitting 18 month lows against the single currency as traders interpreted the latest ECB meeting as inferring that a rate cut remained a much more distant probability, given the tone of Draghi’s press conference. Against the US dollar the euro hit 1.3200 for the first time in over a week, but still remained below the 1.3300 resistance and December highs. We’ve seen broad based US dollar weakness particularly against the Scandinavian currencies while the pound has had a more mixed day, rising against the yen and US dollar after the Bank of England held back from changing monetary policy, however it has lost ground against the single currency, after the positive reaction to this morning’s bond auctions in Italy and Spain. Commodities Broad based US dollar weakness has seen a much bid bias towards commodity prices. The Chinese data has also helped commodity prices in this regard, with copper prices jumping higher. Even though we saw the ECB step back from an imminent move to cut rates in the near term, gold prices pushed to their highest levels this week against the US dollar on the basis that the continued economic weakness cited by the ECB President in his press conference would mean that there would be no reversal in accommodative strategy in the near term either. Gold prices in yen terms rose to their highest levels since 1980. Crude oil prices have taken their cues from the better than expected China trade data seen overnight. The blow out number seen in the export numbers appears to lend itself to optimism that the Chinese economy is starting to embark on an acceleration curve higher. Given that the bulk in the exports surge was to the US has helped the WTI price post the largest gains.


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