Draghi’s words reverberate across global markets

The Dow finally bucked its trend for weak openings, beginning US trading at 17709.5, hitting highs of 17894.5 within minutes of the index opening.

This bullish opening is based on positive sentiment emanating from ECB President Draghi’s interventionist comments surrounding European stimulus, as well as China’s surprise decision to cut interest rates. Despite this positivity in the markets, fears have been ignited in the US over the further discord growing between Republicans and Democrats, as President Obama seeks to use executive power to instigate immigration reform. This led to House Speaker Boehner stating that Obama had torpedoed any chance of bi-partisan co-operation. Such stubbornness from both parties is what led to a government shutdown earlier in the year, and any sign of similar issues is troubling for the markets.

As mentioned, China, due to its slowest expansion in 25 years, has cut interest rates in an attempt to spur on its flagging economy. Like the USA, gold also benefited from this decision, as the precious metal grew by 8.5 points to 1202.45, its highest figure since the month began. Gold has been suffering recently due to the strength of the US economy, but this moment of weakness from China, the world’s second largest economy, has provided the commodity with a much needed boost.

Talking of commodities receiving a boost, Brent Crude oil finally clawed its way back to above the $80 per barrel mark. It had been loitering below this level since last Friday, for the first time in 4 years. This comes on the back of a strengthened sense that OPEC will decide to cut oil production next week when they meet on the 27th.

The DAX was another big winner following Draghi’s comments this morning, jumping 221 points to hit an intraday high of 9722, its greatest value since the end of September. Despite Germany being one of the major oppositions to the ECB’s proposed quantitative easing measures, they have nevertheless received a boost based on Draghi’s decisions, as this afternoon saw the ECB begin to buy asset-backed securities. Unlike the DAX, the euro remained downbeat after Draghi’s warnings of the effects of QE on currency, falling 1% to 1.24183 against the dollar.

Finally, the FTSE had a similarly strong day to its European cousins, beating the seven week high it reached in mid-week to trade at around 6750 for much of the day. This news came as one of the positives in an otherwise mixed day for the UK Tory government. The Conservatives lost a seat to UKIP in Kent, and they were forced to abandon their banker bonus cap challenge as the EU ruled against them. And regardless of the October drop in public borrowing, down £0.2 billion to £7.7 billion when compared to the same time last year, George Osborne’s deficit targets will most likely not be reached by the time of the general election next year, as net borrowing grew by 6.1% to £64.1 billion from April to October when compared to 2013.