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Market update: IEA calls a bottom in oil, dust settles after ECB

European markets recovered from a sharp dose of central bank-induced volatility to trade positively on Friday. The FTSE 100 was higher by over 1.5% with the German DAX and French CAC both seeing gains of over 2%.

As the dust has settled, markets are seeing the new package of economic stimulus measures from the European Central Bank in a more positive light. As we move further out from the ECB meeting, stocks could disentangle themselves from the euro. The jump in the euro reflects short covering from unjustifiably bearish sentiment rather than disappointment over the level of stimulus. The rising belief that the Federal Reserve will hold off on many more rate hikes this year means downside in the euro is limited, even with the ECB enacting more aggressive easing. The euro is lower on Friday as markets calm down post-ECB but remains well up over two days.

A rebound in the oil price after the IEA called for a possible bottom has helped broader stock market sentiment. The IEA did caveat its call for a possible bottom saying that the worst may still not necessarily over. The agency said oil demand remained constant and suggested falling high-cost supply and supply outages in Iraq have supported higher prices.

The price of gold has turned lower after reaching a new one-year high overnight above $1280 per oz in the wake of yesterday’s sell-off in equities. Gold’s strength represents scepticism that the ECB and other centrals including the US Fed have the tools to combat slowing global growth.

Banks were topping the FTSE 100 with Barclays and Standard Chartered both rising over 4% as bank share prices remain volatile in the wake of the new measures to support lending announced by the ECB.

Shares of Old Mutual were one of the handful of fallers in a broad-based rally after announcing a new dividend policy that will likely see lower payouts, while confirming it would split the business into four parts.

US markets look set to start higher on Friday, continuing the rebound off yesterday’s lows with the S&P 500 pointing to an open above 2000 thanks to a rise in the price of oil, while Apple has announced new product launches for March 21.

USA pre-opening levels

S&P 500: 19 points higher at 2,008

Dow Jones: 147 points higher at 17,142

Nasdaq 100: 49 points higher at 4,335

 

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Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.