Market Comments

ECB-inspired afternoon resilience in European equity markets drags the FTSE ever closer to the 7000 level.

UK markets

Once again the Bank of England posted interest rate and asset purchasing schemes that were unchanged; this has now become such an unsurprising event that one interested party sent out their analysis of the event fifteen minutes prior to its release. Always more likely to stir up interest was today’s European Central Bank press conference in Cyprus. Mario Draghi and his team have confirmed that the new eurozone QE would start on 9 March. Less clear was exactly how this would work. Considering the eurozone nations have only sold €50 billion of debt a month and the remit was to purchase €60 billion a month, the shortfall will need to be made up in the secondary market. If the ECB has to start haggling with banks for their existing positions in eurozone sovereign debt, this could become a costly and complicated process very quickly.

When you consider that 14.46 index points were taken out of the FTSE because of such heavy weights as HSBC and Rio Tinto going ex-dividend, the early-morning charge to all-time highs and the mythical 7000 level was quite impressive. Just ahead of next month’s merger, both Aviva and Friends Life have wowed the markets with their expectation-beating full-year figures seeing shares in both over 7% higher heading into the close. With the synergies and cost savings anticipated by this merger expected to add up to £225 million a year, this momentum could continue for some time. Interestingly, the London Stock Exchange also posted its full-year figures, showing a 19% jump in its pre-tax profits due to the abundance of equity IPOs last year. In fact, the volume of companies seeking a placing on the stock exchange was the largest since 2007, and integration with Clearnet and the Russell indexes have achieved increased cost-saving synergies.

US markets

Today’s US unemployment claims came in higher than expected, but as they were released at the same time as the start of the latest ECB press conference few investors took note. In the final run up to the US non-farm payroll figures US equity markets continue to look jittery regardless of the bullish mood going on in Europe. Somewhat out of sync with the majority of US corporations, Staples is due to post its fourth-quarter figures just ahead of tomorrow’s open. Abbvie has continued its spending spree with the $21 billion purchase of cancer drug manufacturer Pharmacyclics. Wholesalers Costco surprised the markets with second-quarter figures reflecting a 29% increase in earnings, adding 2% in
early trading.

Commodities

Oil prices continued their lateral moves, with Brent crude moving beyond the $60 level while its US light counterpart skates along just above the $50 level. A plethora of global macro news stories have prevented oil from gaining too many headlines of late, but the fundamentals of oversupply and weak demand continue to hold court. Although yesterday’s US oil inventories came in at levels two-and-a-half times higher than expected energy prices barely showed a ripple. The $1200 level continues to be the key battle ground for gold as traders continue to keep their fingers crossed that the precious metal can continue to hang onto this level.

FX

All eyes were on Europe today as the BoE surprised no one by keeping both interest rates and its asset purchasing facility unchanged. This was followed by the ECB who also kept rates unchanged but then embarked on a Mario Draghi-hosted Q&A session for a financial press pack enjoying the balmy Nicosian weather. The last twenty-four hours have seen EUR/USD posting new multi-year lows, and today’s events have done nothing to change the pattern as the dollar continues to dominate. Also suffering at the hands of the American currency was GBP/USD, arguably putting up a little more of a fight than the euro.