Eurozone market jitters as the ECB QE decision rapidly approaches

The FTSE remained strong this morning as the Eurozone suffered pre-meeting nerves and the US was downbeat after Obama’s State of the Union address.

The FTSE continued to post gains this morning as it continued to benefit from positive sentiment surrounding ECB QE whilst distancing itself from any of the messiness over potential stimulus that is afflicting the Eurozone indices. A flurry of data saw this upward trend continue, as UK unemployment fell to its lowest since 2008; however, average earnings remained stagnant, and will remain a key issue as the election approaches. Interestingly, after months of a 2-0-7 vote on raising interest rates, the final 2 hawks in the BoE relented after inflation figures crumbled last week, flying the face of George Osborne’s positive rhetoric surrounding falling CPI.

After a State of the Union address last night that was high on rhetoric and low on policy, one that aimed for a more equal US alongside boosting the ‘struggling’ middle-class, the US futures aren’t too excited by what Obama had to say, and look set for a weak open. The US markets haven’t felt any of the bullish sentiment that has intermittently enveloped Europe, and has failed to capitalise on the run the Dow Jones saw at the end of last year. With only building permits and housing starts to be announced this afternoon, the US may have to wait a bit longer to start a full-blown rally.

With it almost time for the ECB to face the music tomorrow, the Eurozone indices were struck by less than reassuring comments by the Central Bank’s Ewald Nowotny, who warned the markets to check their expectations for tomorrow, whilst downplaying the potential of a euro break-up. This caused the Eurozone markets to appear flat as investors become more wary over the chances of disappointing news arising from the ECB meeting on Thursday.

Oil managed to continue its relatively stable performance, with Brent Crude creeping back above the $48 per barrel level. However, reports from Davos have highlighted that business leaders from key energy-producing companies, including Russia, are more downbeat on their outlook for the world economy due to oil’s decline. On top of this, the commodity will once again have to bear the brunt of the US crude oil inventories figure later this afternoon, a number that is a looming presence for oil each week. It was a different story for gold, which briefly stuck its head above the psychologically significant $1300 per ounce level for the first time since mid-2014. The precious metal may be a big winner after the ECB meeting tomorrow if the euro follows the example set by the yen in November.