Markets relatively calm after yesterday’s SNB surprise

After the SNB jumped out of the economic closet shouting ‘boo’ at the markets, the European indices managed to recover from the shock of the Swiss decision, whilst the US markets continued to struggle under their own poor data.

The Eurozone is still suffering from an inconsistent reaction to any QE news, flip-flopping between gains and losses. With the SNB effectively confirming that Draghi will announce some kind of stimulus, Eurozone was largely positive at the start of the day. However, with final CPI figures coming later this morning likely to confirm deflation for the region, investors will be caught between the fuel this gives for the ECB’s QE argument, and the realities it indicates surrounding the Eurozone’s economic health.

One of the big beneficiaries of the SNB currency-cap-removal was gold; the precious metal saw prices leap as it gained back its validity as a safe alternative investment after months of struggling in the face of the US dollar. With the euro set for a potential collapse a la the yen post any QE announcement, gold’s prices may continue to rise as investors flee the Eurozone currency.

There was also in introduction of relative stability in copper and oil, as the commodities stopped the precipitous falls they had suffered earlier in the week. However, for oil there was more bad news this morning, as the IEA warned that there will not be a recovery any time soon, claiming that the floor for the commodity is ‘anyone’s guess’. Yet, for the time being Brent Crude is able to maintain its $49 per barrel mark, meaning that once again the FTSE was allowed rest bite from being hammered down by its commodity-based stocks. Like its Eurozone cousins, the UK index recovered yesterday afternoon and saw that sentiment continue into this morning for a tentatively positive open.

Finally, whilst the European indices largely rebounded after yesterday’s shock, the US markets were further stunned by more bad data, namely growing unemployment claims and a big fall in the Philly Fed manufacturing index. Later sees the announcement of USA CPI, and it might not be the news the Dow Jones needs to escape its 5 day losing streak; inflation has been the bugbear of the global markets of late, and anything consumer-based has been a weak point for the US economy recently. With futures already pointing to losses, the US markets could sink further into the red if its CPI disappoints this afternoon.