Draghi's Surprise ECB Rate Cut Sends European Stock Markets Soaring

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Stock Market Trading

: 05 September 2014

With the MPC standing pat on rates yesterday, the FTSE was largely unchanged, however, continental markets were sent soaring by a surprise cut from the ECB.

Such was the verve shown by European markets that we are expecting to see some of that froth come off on the open, leading to a slightly weaker start.

Mirroring the previous session, the ECB stimulus package encouraged initial gains for US equities but they soon displayed signs of fatigue, with the Dow slipping back to close modestly higher at 17,102.

The sell off was principally led by energy producers suffering from a steep drop in crude oil prices.

Markets have also been kept on edge by the mixed signals coming from Ukraine.

Although Putin and Poroshenko appear to be brokering a peace deal, it doesn't seem that anyone has told the troops in the field who are still going at each other just as violently.

With this in mind, traders are likely to remain on the sidelines for the first part of today's session as attention naturally shifts to the Nonfarm Payrolls report.

Expectations are for 225k jobs to have been created which will mark the 6th successive +200K reading in a row, strengthening the US recovery story.

Given that we've already seen a good run of economic data from the US, it feels as though the bulls will want to target more record highs even if we get a slightly weak figure.



Stock Market Trading

: 04 September 2014

European indices are set to edge lower on the open.

Despite crossed fingers that the ECB will start up the printing presses and signs of reduced tensions in Ukraine, both have a history of disappointing.

Mario Draghi has rehashed the phrase 'do whatever it takes' for two years and the potency of those words has naturally waned as markets felt he was crying wolf.

Fearing that verbal quantitative easing wasn't working, Mario Draghi ramped up expectations at Jackson Hole by alluding to possible action soon.

Unfortunately, he has put undue pressure on himself and both spread betting and CFD trading investors will want to see something concrete at today's ECB press conference.

The risk is that simply repeating what he said at Jackson Hole will not be enough.

Markets also jumped on the news that Putin and Poroshenko had agreed on a ceasefire yesterday.

However, many remain sceptical about Putin's intentions.

Whenever condemnation gets a little too hot he seems to extend a hand of friendship, by calling off military exercises or agreeing to talks, only to break it off with an even bigger incursion.

It was perhaps this scepticism that saw US equities give back most of their initial gains, with the Dow Jones finishing just 16 points higher at 17,077.

Encouragingly however, the Fed's Beige Book report indicated that the US economy continues to recover without losing steam despite the troubles in the rest of the world.



Stock Market Trading

: 03 September 2014

European stocks are set to open flat as there's just too much going on at the moment for traders to comprehend.

Amongst the information overload, we have the ECB and BoE meetings on Thursday, US jobs data on Friday and NATO meeting over the next two days to formulate their response to IS in the Middle East and the crisis in Ukraine.

Even if the economic side of things suggests that the bulls should have the day, traders are unable to make definitive decisions and so are sitting on the sidelines until they get some clarity.

With so many references to 1938, the Cold War and even subtle suggestions of nuclear war from the Kremlin, it would only take an overzealous comment from NATO or Putin to send the markets into a tailspin.

Yesterday's US manufacturing data showed a stronger than estimated expansion with the figure rising at the fastest pace in 3 years.

However, a sell off in crude oil weighed on energy producers so equity markets decided to take a breather.

As a result, the Dow Jones slid from record highs to close 30 points lower at 17,061.

Could a positive payrolls report reignite the rally?



Stock Market Trading

: 02 September 2014

Stock markets remain jittery this morning, with Europe set to open fairly flat.

With no cues from the US after the Labor Day holiday, European traders have been left to weigh up geopolitical tinder boxes on the one hand and possible ECB gift boxes on the other.

With Russian troops allegedly crossing the border and the Ukrainian Defence Minister claiming that a 'great war' is coming, markets should be tumbling.

However, the perversity of bad news is good if it leads to quantitative easing from the ECB got another boost yesterday following yet more weak economic data in the form of Manufacturing PMIs.

When markets are in this awkward period of stasis, it feels like something big is about to shove them one way or the other.

So if you see Putin going shirtless or Mario Draghi bulk buying paper, that could be a good hint to get positioned either way.

Amid a quiet trading session, with volumes more than 30% lower than last month's average, the FTSE 100 rose by just 7 points to 6824.

The price action was dominated by a rise for BAE Systems and rumours that ITV is to be the subject of a takeover.

At the other end of the scale, Tesco was under pressure after being in the spotlight lately for 'the lack of strategy'.



Stock Market Trading

: 01 September 2014

European equities are set to open mixed on conflicting cues.

The run of weak economic data from the continent continued with another dip in inflation, rising unemployment in Italy and a collapse in German retail sales on Friday, adding further pressure on Mario Draghi to do something more.

Despite the August rally petering out over the last few sessions, the bulls are hanging onto hope that this week's ECB meeting will give at least some indication that stimulative relief is on the way.

However, on the flip side is the continued engulfing of Ukraine by 'Russian backed' forces.

With Putin growing increasingly confident that he can act with impunity, the opening of a new front in the conflict near Mariupol should have sent traders reeling.

Instead, traders are slightly relieved that the only thing the West can cobble together is another set of flaccid sanctions, which the Kremlin will surely shrug off.

Ahead of today's Labor Day holiday, US equity trading was rather thin and volumes were well below average.

US economic data had remained strong, with consumer sentiment surpassing expectations, but cautious investors did not want to leave too much on the table ahead of the long weekend.

As a result, the Dow Jones pulled back in the afternoon session, closing 20 points lower at 17,088.


By Jonathan Sudaria, 5 September 2014


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