Chinese liquidity injection boosts sentiment

Any waning momentum felt in European indices yesterday has been offset by monetary intervention from the People's Bank of China this morning.

An emerging credit crunch in the world’s second-biggest economy has become one of the more prominent event risks over the past year. For now, the Chinese authorities appear to be stemming investor concerns.

Even news from Federal Reserve-watcher Jon Hilsenrath, that the Federal Open Market Committee is likely to continue to shave its asset-purchase programme by an additional $10 billion per month, does not seem to have fazed the bulls.

The injection of Chinese liquidity has also reinvigorated some of the subdued sentiment felt around today’s corporate earnings releases.Despite the slide in peripheral bond yields and better economic data for the eurozone as a whole, the main theme of corporate reporting recently appears to be a lack of growth and consumer demand. The strong euro has also been blamed to some extent for less-than-stellar profits.

SAB Miller has slid to the bottom of the UK index. Despite higher third-quarter sales generated by growth in emerging markets, weak consumer disposable income in the likes of Europe and the US has seen beer sales lose their fizz in developed markets. Net producer revenue fell by 6% in Europe alone. The stock has hit all-time highs and seen gains of 35% year-to-date, so the decline of 1.94% should not unduly worry investors.

Unilever surprised the markets with better-than-expected growth of 3% in the year, and like-for-like sales were up 4.1% against expectations of 3.85%. Once again, however, the spectre of currency depreciation in emerging markets has taken its toll. The stock underperformed the FTSE 100 last year, and is still down some 12% since last May, yet it is now riding the top of the UK benchmark, with shares gaining 2.93%.

German consumer sentiment, in light of the five-and-a-half-year highs in the DAX, was not expected to disappoint. Forecasts were that the index would jump to an eight-year high. The degree of upside sentiment in equities at the moment is, when broken down to basic fundamentals, a little exuberant. The sentiment index, falling from 62 in December to 61.7, perhaps reflects this.

The Dow Jones is currently set to open 42 points higher at 16,500.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts

Een artikel zoeken

Form has failed to submit. Please contact IG directly.

  • Ik wens per e-mail informatie van IG Group bedrijven te ontvangen over handelsideeën en IG's producten en diensten.

Voor meer informatie over hoe wij uw gegevens mogelijk kunnen gebruiken, bekijkt u ons Privacy- en toegangsbeleid en onze privacy website.