Overall, it has been another big day for stock markets around the world. The Dow and S&P 500 advanced to new all-time highs as the post-election honeymoon for markets continues supported by energy price gains and solid jobless claims.
European indices and currencies were particularly active today staging major swings in both directions around today’s ECB news. The central bank decided to extend its QE program from March 2017 to December 2017 but also decided to cut the pace of purchases back to €60B per month from €80B per month starting in April.
At first the market took the ECB news as hawkish but dovish details offset and then reversed initial thinking. The ECB also indicated that it could extend the program or re-accelerate purchases if needed, making this look like a one-time cut rather than a steady program of tapering toward zero like the one the Fed conducted in the US over the course of 2014. Dovishness continued though President Draghi’s press conference, sending EUR down sharply to a 1.3% loss on the day and igniting a 1.75% rally for the Dax
At this point in the cycle, central banks should be normalizing policy as the Fed is doing, to reflect improving economies. This half-hearted taper in Europe raises questions about whether QE to date has been a partial or a complete failure and raises questions about the health of the Eurozone economy. Questions about the political, economic and financial outlook for Europe sent other continental currencies sharply lower including CHF, PLN SEK and others. GBP was insulated from the worst of the declines, a positive impact of Brexit.
It was a positive day for energy prices with oil and natural gas shrugging off corrections and posting 1.8% gains. CAD and RUB rallied along with energy prices but NOK did not as it was caught up in the European selloff.
Heading toward the weekend, indices continue to attract strong support, it will be interesting to see if this positive momentum carries through to the finish or if we see any attempts at profit-taking. For Asia Pacific traders, Chinese inflation reports may attract some attention following yesterday’s disappointing export figures. Tomorrow brings trade reports for the UK and Germany and that’s about it so we may see the fallout of today’s meeting and speculation ahead of the weekend OPEC/non-OPEC production meeting and next week’s FOMC meeting dominate trading sentiment.
There have been no major announcements after the US close today.
Significant announcements released overnight include:
ECB QE Decision program extended to December 2017, purchases cut to €60B per
month from €80B per month starting in April 2017
Canada housing starts 184K vs street 191K
Canada new house prices 3.0% vs previous 2.8%
Canada building permits 8.7% vs street 2.0%
US jobless claims 258K vs street 255K
US natural gas storage (42 BCF) vs street (45 BCF)
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
12:30 pm AEDT China consumer prices street 2.2%
12:30 pm AEDT China producer prices street 2.3%
7:00 am GMT Norway consumer prices street 3.5%
7:00 am GMT Germany trade balance street €22.0B
9:30 am GMT UK trade balance street (£4.3B)
9:30 am GMT UK construction output street (0.1%)
9:30 am GMT UK BoE/TNS inflation outlook previous 2.2%
10:00 am GMT Greece industrial production previous 0.1%
10:00 am GMT Greece consumer prices previous (0.5%)
10:00 am EST US consumer sentiment street 94.5
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