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.
The CAC and the DAX have both climbed almost 2% in early trading, broadly back to their pre-speech levels and even the FTSE, the European laggard, is up by 1.3%. The chaos of yesterday has subsided as traders have come back into the office having had a little more time to digest all the changes Mario Draghi introduced. It’s amazing what the concept of an extra €20 billion of quantitative easing (QE) working its way into the markets on a monthly basis can do for confidence.
Currently 90% of Eurostoxx companies are trading having hit four-week highs, however it is also true to say only 20% of companies in the index are currently trading above their 200-day moving averages. Expectations had been high, and to be fair, the European Central Bank (ECB) delivered at the top of the range. Traders though are a cynical bunch, and the extent of stimulus measures was taken as a signal of how worried the ECB was about the current state of affairs in Europe, as opposed to how determined it was to help improve the outlook.
The announcement that some corporate debt would be added to the basket of eligible debt purchases for the current ECB QE scheme has seen the banking boosted, jumping by 4.12% in the EuroStoxx and by 2.5% in the FTSE.
Tim Martin continues to be the most vocal mouthpiece for the pub sector as the CEO of JD Wetherspoon has once again highlighted the discrepancies between the taxation of pubs and supermarkets when selling alcohol. The 9.4% increase in its tax bill is taking the lion’s share of the blame for falling first-half profits.
Gold enjoyed a flurry of excitement in overnight Asian trading, hitting an intraday high of $1284 giving fresh conviction to gold bugs’ hopes that the metal can make its way up to the 2015 highs of $1307. Moments of panic as seen yesterday are just the thing to keep the flight to security thinking fresh in investors’ minds. Once again, oil prices are on a surge with WTI and Brent crude straddling the $40 level and confirming their somewhat surprising bond with equity market strength.