ECB casts a shadow

Yesterday’s underwhelming ECB action still hangs over the markets. 

American flag outside US stock exchange
Source: Bloomberg

It looks like ECB president Mario Draghi set a rod for his own back when he surprised the markets with his aggressive initial QE scheme back in January. This time round, regardless of the increase of stimulus, the market has been left wanting more. Europe’s initial disappointment has been contagious, hitting global markets and setting a weak tone as we close out the week.

The reaction we have seen in the markets could be a forewarning of what might transpire if the Fed doesn’t increase rates by a suitable margin or even fail to raise at all. Expectations are for today’s non-farm payrolls figures to return to the year’s average of 200,000 jobs created, and only a particularly disappointing  set of figures is likely to be enough to trigger a rethink from Fed Chair Janet Yellen and her team.

Moving away from interest rate decisions, the biggest factor affecting inflation has been the determination of Saudi Arabia to drive oil prices lower, regardless of objections from non-Arab OPEC members. Today’s meeting in Vienna – a little later in the year than normal – will be an interesting test of their unity in thinking, as the pain of reduced income affects all of the member nations. Considering all of the sound bites we have heard up to this meeting, a rethink of the strategy isn’t set to be introduced just yet.

An annual increase in November passenger numbers of 9.6% – especially when you consider the greater exposure to Egypt – might otherwise have seen easyJet feeling quite pleased with itself. That is, of course, until it notes the 25% improvement posted by Ryanair yesterday.

Yesterday’s move in the dollar has seen both base and precious metals, along with oil prices, move higher. The improvement in commodity prices has seen stocks in the mining and energy sectors move higher, offering a little of the Friday feel-good factor to stocks which had otherwise had a torrid week.

Ahead of the open we expect the Dow Jones to start 98 points higher, at 17,575.

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