ECB disappointment prompts market selloff

Unfulfilled market expectations have seen equities sell off in the second half of the day, and heading into the close the FTSE 100 was looking distinctly weary having fallen below 6700. 

ECB headquarters
Source: Bloomberg

FTSE below 6700

The Bank of England went through the motions with today’s interest rate decision, but considering that it was before March 2009 when it was anything other than 0.5%, all eyes were trained on Europe.

As European Central Bank president Mario Draghi again turned up late for his own press conference markets should have been prepped for disappointment, and so it transpired. The lack of any QE announcement saw the DAX drop and pull the rest of the European equity markets with it. As ever, it was the snippets of information in the Q&A session that offered the most for traders to digest, and the confirmation that any decision on QE would not need to be a unanimous one offered the most light at the end of the tunnel.

The travel and tourism sector received another boost from TUI Travel as it posted profits up 11%.

EasyJet, Ryanair and AIG airlines continue to factor in the implications from yesterday’s Autumn Statement.

Irn-Bru drinkers continue to prop up parent company AG Barr's figures, as the drinks manufacturer confirmed it was on track to hit its full-year targets.

Pub firm Greene King on the other hand has seen shares fall, as lower like-for-like sales have taken the froth off the top.

Dow close to 18,000

European troubles look to have crossed the Atlantic as US traders watched markets fall and optimism squashed. It should not be too long before issues elsewhere are forgotten and the focus is once again shifted back on them.

Historically, the month of December has been kind to traders, and with the Dow 18,000 level tantalisingly close it should not be too long before we see a concerted effort from traders to hit this target. This slight stutter ahead of tomorrow’s important non-farm payroll figures might just see a touch of caution hit traders, and that may not be a bad thing.

Negative sentiment weighs on oil 

With increasing regularity the question ‘can oil trade below $60’ is being asked on trading floors in the City, as the bearish sentiment hanging over the commodity shows no sign of easing. Follow up comments from OPEC members over the week have given little reason to believe that the market oversupply will be readdressed any time soon.

Gold continues to defy gravity as a combination of rumours involving India relaxing gold import taxation and Russian buying has propped up the precious metal. 

Euro shoots higher

The fact that today’s ECB announcement saw no change to the key rates surprised no one; however the lack of any European quantitative easing saw EUR/USD shoot higher.

Markets had gotten too big for their boots as they attempted to get ahead of the central banks, something that historically ends badly for the markets. Currency markets have attempted to front run the ECB as they had begun to price in an expectation that the central bank would indeed engage in an aggressive policy to expand its balance sheet via a US-style quantitative easing policy. Mario Draghi continues to tread water, hoping that next week’s tranche of targeted LTROs will start to improve market confidence.

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