UK struggles after Autumn Statement as Eurozone anticipates Draghi announcement

The big economic news from yesterday, the Autumn Statement, continued to weigh on the FTSE as Chancellor George Osborne’s announcements were viewed unfavourably by the UK index, which fell to 6713 from an open of 6729.3 after the bell.

Whilst the statement bode well for airlines, housing companies were mixed in their reaction to the stamp duty reforms, whilst banks were less than pleased about a tax that prevents them offsetting taxes against post-crisis losses. This negative reaction, combined with the news that public spending cuts could reach levels not seen since the 1930s meant that Osborne won’t be receiving any Christmas cards from the FTSE any time soon.

Later today sees the Official Bank Rate, which follows the news that UK inflation will be 1.4% this year, and then fall to 1.2% in 2015. This is well below the Bank of England’s target of 2.0% inflation, so it will be interesting to see if this is acknowledged by the BoE this afternoon.

As the FTSE continues decline in the aftermath of the Autumn Statement, the DAX broke through the 10000 level this morning in anticipation of an ECB conference this afternoon that may finally bring confirmation of Eurozone economic stimulus. If Draghi does indeed announce concrete plans for QE, then the DAX may be able to maintain this breakthrough for a while; however, if recent trends continue, it may not even take firm action from Draghi to cause this to happen. The Eurozone markets have been very receptive to the slightest whisper of QE from Draghi, so as long as QE is hinted at, failure to announce an actual plan will most likely have no impact on the Eurozone indices.

The Dow Jones matched this European positivity by predictably reaching another record high yesterday, closing at 17905. The Dow seems to have put to bed any oil-inspired post-Thanksgiving wobble, and has resumed its incredible run, as it sets its eyes on 18000 before Christmas. The US markets continue to be buoyed by a dominate dollar, which is a hair’s breadth away from 120 against the yen, reaching 119.977 this morning. There is a potential spanner in the works for these record runs; the US markets may struggle to maintain these highs if US unemployment claims today, and non-farm employment change tomorrow, come in lower than expected.

Finally, bolstered too by Eurozone positivity, alongside the Dow’s strength, 10 days before its snap election Japan’s Nikkei reached a high of 17902.5 at open today, slipping slightly to close at 17887.5. Despite uncertainty traditionally being part of an election run-up, confidence in a Abe win is allowing the Nikkei to continue a strong performance at the close of 2014.