Spreadex Market Update
Monday morning calm before the storm as the Eurozone readies for QE
A move by Chinese regulators to clamp down on margin trading and other risky investment practices saw the Shanghai Stock Exchange suffers its greatest fall since 2008. This news lent the morning a bearish hue, as with the USA resting on MLK Day and a quiet day for data, the European markets had little in the way of their own fresh information. This allowed the ECB meeting on Thursday to once again take its prominent place in the mind of the markets.
After the Eurozone saw a strong Friday as the dust settled on the Swiss National Bank’s currency-cap-removal, all signals are now pointing to the announcement of some kind of bond-buying programme on Thursday. However, this looming event didn’t provide the jubilation for the Eurozone markets that one would expect, as Draghi and the ECB now run the risk of disappointing investors if the stimulus plan isn’t sweeping enough. This morning brought rumours that this quantitative easing plan will be implemented on a national bank basis, rather than the broader stimulus Draghi was thought be seeking.
It is signs like these that are putting a dampener on the run up to the meeting on Thursday, as each day sees more weight build on the shoulders of the ECB President. Factor in the wild-card Greek election to take place on Sunday, and the Eurozone’s performance this week looks decidedly up in the air. The doubts that have begun to creep in around QE have provided the euro with a brief rest-bite, as the currency managed to stall its fall on the back of this news. However, this is likely the calm before the storm for the euro, as it is expected to go the way of the yen come QE time.
Finally, the FTSE opened marginally higher this morning after it saw the same kind of growth felt by the Eurozone last Friday. With both oil and copper relatively calm, the commodity sector could take a backseat and allow the UK index to enjoy a moment of peace before what is surely to be a turbulent week. This calm didn’t extend to the pound which continued to suffer against the US dollar, a narrative that has been largely uninterrupted since mid-2014.
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