Draghi helps markets complete clean sweep

Global markets are preparing to close out their best week in over a month, highlighting that despite the anxiety and initial risk-off sentiment seen early on Monday, markets are typically very resilient despite the threat posed by terrorism. 

ECB flag
Source: Bloomberg

The week has been one of inverted logic, with indices strength and US dollar weakness following a hawkish Fed on Wednesday, while miners and oil producers continue to rally despite tumbling commodities prices.

No doubt, the sector that stands to gain the most as the world raises its resources in the fight against ISIS is defence firms such as BAE Systems, which has seen its biggest weekly gain for years. With Russia today announcing its plan to double the amount of airplanes in Syria, this could be just the beginning as austerity goes out the window for the sake of security.

Mario Draghi has a talent for making the most of each policy move, with the European Central Bank president famed for his dovish rhetoric which keeps European markets rallying and the euro falling. As we approach the December meeting, Mr Draghi is making it seem ever more likely that the ECB will act, by either cutting rates, raising QE or extending QE. The problem is that for every time he speaks, he raises the markets’ hopes of action and thus the negative market reaction should the ECB fail to act.

Abercrombie & Fitch’s shareholders have cheered the circa 17% rise in its share price, despite same-store sales falling for the eleventh straight quarter. Seemingly, the decision to remove any sales and instead sell at full value is working well as profits doubled. This is a clear heads-up that competitors should maybe avoid partaking in the Black Friday and Cyber Monday sales which would no doubt reduce its full-price sales and hurt margins.

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