Autumn Statement dominates the news before ECB announcement tomorrow

The big financial news of the day came from the UK, as George Osborne revealed his election-inspired Autumn Statement, his final before the public go to the polls in 2015.

The FTSE’s immediate response was negative by falling 0.2% to 6723.5, with the implicit threat of continued austerity if the Conservatives were re-elected resulting in a bearish sentiment around the UK index.

Osborne announced the oft-termed ‘Google tax’ on 25% of profits on those multinational companies that divert their profits, a tax that analysts have cast doubt on due to the complexity and potential for international agreement such a tax would require. The government also announced the voter-luring income-tax-inspired reform to stamp duty, making it cheaper for people to buy a new home. This latter move caused Foxtons, the estate agents, see share prices fall by 5% as it fears the increase in tax on homes over £1.5 million.

However, with Osborne reiterating what Cameron said in November, stating that there are red warning lights over the global economy, he announced that borrowing had increased from forecast, to be £91.3 billion for 2014-15, falling slightly each year until a Tory-predicted £4 billion surplus in 2018-19. Growth was at 3% for the year, but is expected to fall year on year from next year, with inflation at 1.5% for 2014, set to fall to 1.2% in 2015, well below the Bank of England’s target of 2%.

Overall this Autumn Statement was voter-bait in the lead up to the election, with aspects like the stamp duty reform appearing as an attempt to distract from the forecasted weak growth, low inflation and high-than-expected borrowing figures. The shaky forecasts for the British economy means it is unsurprising the FTSE reacted the way it did.

Across the pond, Eurozone retail sales growth fell to 0.4%. However, as the Eurozone readies itself for another Draghi announcement tomorrow, the DAX has remained relatively flat today, looking to close at 9956 after opening at 9956.2. As has been the trend recently, any murmur of Eurozone QE causes the euro to struggle, as it fell against the dollar by 0.5% to hit 1.23166. If firm action is announced tomorrow, this gulf between positivity on the Eurozone indices and the woes of the euro against other currencies will continue to increase.

After rocketing to close at a record high last night, the Dow Jones opened slightly lower today at 17877.5. This may, in part, be due to lower-than-expected ADP non-farm employment change, at 208,000 instead of the forecast 223,000. Whilst this figure may not directly map onto the government released non-farm data, it is still a worrisome indication for the volatility-causing number when it is announced on Friday.

Finally, in the midst of this worldwide market movement, the recently volatile gold and oil have had a stable day, with both remaining flat at the significant $1200 per ounce and $70 per barrel levels respectively. At the moment flatness is the most these commodities can ask for without outside help; a prolonged period of stability may then lead onto more positive rallies in both of these markets.