This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. 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. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Mario Draghi has helped European markets to a choppy start to the day, with his usual plethora of dovish comments driving the euro lower. Despite Mr Draghi’s dovish tones, the choppiness in the FTSE reflects the weakness of the oil and gas sector, following yet another drop in crude prices yesterday which saw Brent hit a two-month low.
BAE Systems is today’s biggest riser in the FTSE, rising 3.24% in early trade. The announcement of job losses across both the UK and Australia signals a willingness to be nimble and adjust to trends in the market. While the firm forecast no earnings growth for 2015, strong sales growth and a large orders backlog provided sufficient confidence that the firm will continue to perform. This was in stark contrast to rival Rolls-Royce, which has hit its lowest level since 2011 on yet another profit warning. It is the hint of a dividend cut that is alarming shareholders, since the solid payout was one of the last reasons many likely had for investing in the firm.
The ability to talk down the euro has been one of the resounding features of Mario Draghi’s presidency at the European Central Bank and he has struck again this morning, citing the potential for an extension to the Quantitative Easing programme past September 2016. This was in fact no different from ECB member Benoit Coeur who declared that ‘the decision isn’t taken’ ahead of December’s meeting. Yet Mr Draghi knows how to push the buttons to keep the euro on its downward trajectory, raising eurozone competitiveness and increasing import-driven inflation.
As the US, Canada and France come back from a day’s holiday, volumes and volatility are likely to return, most notably to the US session. With Janet Yellen due to take the stand for the first time since Friday’s blockbuster jobs number, markets will be waiting with baited breath for any comments relating to a December rate hike.
Ahead of the open, we expect the Dow Jones to open just three points higher, at 17,705.