Markets hit multi-year highs

European quantitative easing-inspired optimism continues to edge equity markets higher, as the FTSE advances 25 points in early trading.

City of London
Source: Bloomberg

This is the week equity markets believe the European Central Bank will announce its own version of quantitative easing as the first couple of hours have seen European equity markets hit multi-year highs. Certainly the markets’ reaction to disappointing economic data in the last couple of weeks has shown they believe ‘bad news is good’, and as the picture gets a little worse its brings the ECB a step closer to implementing QE.

Before we get to Mario Draghi’s big Thursday event we still have Chinese GDP, German ZEW, UK unemployment and Bank of Englang minutes to absorb.

Commodities may not be at the forefront of traders’ minds but the relative calm of oil, as it oscillates around $50, has given time to turn our attention back to gold. There have been numerous events the precious metal could have used as a catalyst to break out of its bear trend, and it finally seems that the metal has discovered the strength to do so.

After being forced to announce several profits warnings during 2014 it appears that 2015 has at least started off on a more positive note for Balfour Beatty, as it has been awarded sole contractor on a £1.5 billion contract covering UK public sector infrastructure maintenance.

Ahead of Tuesday’s fourth-quarter figures, expectations have increased that BHP Billiton will need to cut $4 billion from its US exposure to shale energy operations.

Also out tomorrow will be Rio Tinto with its full-year figures, which are likely to guide the confidence investors have on the heavily weighted FTSE mining sector.

UK pub chain Greene King has posted disappointing sales figures covering the Christmas period, citing tougher drink drive laws in Scotland eating into its returns.

Last week saw US markets rally into the close, a particularly positive sign especially with markets being shut today for Martin Luther King Day.

Having seen a number of the banks report last week a corporate analysis will broaden out as the likes of Netflix, eBay, Verizon, General Electric and McDonald's all report this week, giving even more insight into the state of the US economy.

Although Europe will spend most of the week preoccupied with its own issues, US attention will no doubt focus on Barack Obama’s State of the Union address on Wednesday morning.

Ahead of the open we expect the Dow Jones to start 47 points lower at 17,464.

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