Confidence undermines rally attempts

The attempted fightback for European indices failed to last any more than 30 minutes this morning, as the FTSE soon continued to move south.

Source: Bloomberg

As ever, the feeling is that wherever crude prices move, the indices will follow given a relationship which seems to be stronger than ever.

The issue here is one of confidence and unfortunately, the only confidence that seems to be evident is that of traders who believe both crude prices and subsequently the FTSE 100 will go down.

Today’s headline event is coming out of the European Central Bank, where Mario Draghi re-emerges to follow up on yet another disappointing meeting in December. The issue with Mr Draghi is that his ability to talk down the euro tends to outstrip any eventual policy shift, and thus the warm-up act is often better than the main event at the ECB.

Despite the strengthening of the single currency, alongside tumbling stock market valuations, there is little expectation by way of monetary policy changes today. Instead, we look once more for Mr Draghi to begin the job of jawboning the euro down with promises of potential future action.

The big potential movers for today’s meeting thus centre upon a dovish Draghi who could lead markets towards expectations of a March rate cut, alongside any reduction in inflation expectations to reflect tumbling crude prices.

Ahead of the open we expect the Dow Jones to start 87 points lower, at 15,679.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. 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. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.