Greece ahead of QE in traders' minds
Traders in London initially jumped on the quantitative easing speculation bandwagon but Mario Draghi has suggested additional easing one too many times. Eurozone equity markets have seen a wide trading range today as the prospect of quantitative easing from the European Central Bank sent stocks soaring, but it was short-lived.
The prospect of an anti-austerity party winning the up and coming Greek election has overshadowed Mario Draghi’s extra stimulus chatter. When it comes to the eurozone, traders don’t take any chances and the fear surrounding Greece greatly outweighs the glee of QE.
Dow at 17,828
The Dow Jones is up five points at 17,828 as the US market is less sensitive to the comments from Mr Draghi. US equity traders are geographically and politically separated from Europe, and the suggestion of QE from the ECB carries less weight across the pond.
It has been a slow day in terms of news flow but both the ISM manufacturing and construction reports point to an easing of US growth. I fear US dealers are slipping back into the bad habit of secretly craving softer economic indicators to ensure the Federal Reserve will sit on its hands.
Brent above $56
Gold has started 2015 the same way it finished 2014, in negative territory. Gold has lost its edge as traders plough their cash into government bonds if they seek a safe haven status. The metal will run into problems later this year when the Fed looks to increase interest rates, and when that day comes the metal won’t have a leg to stand on.
Brent is hovering above $56 as another sharp drop in the price has proved that the energy market is not stabilising. Admittedly, the oil market is taking bigger breaks between severe declines but the bulls are still nowhere to be seen.
Pound at lowest level against dollar
The euro has started the New Year off on the wrong foot after Mario Draghi dropped another hint that he would embark on QE.
Mr Draghi has a track record of alluding to additional stimulus on the run up to the ECB meeting, but government bonds have yet to be acquired. Dealers don’t want to call Mr Draghi’s bluff when it comes to the possibility of quantitative easing, as the ECB chief knows full well.
The Australian dollar has been hit by feeble Chinese manufacturing figures as the slowdown in China is putting the brakes on the Australian mining boom. The slide in British manufacturing and a decline in UK mortgage approvals has pushed the pound to its lowest level against the US dollar since August 2013.