Europe regains ground, the US looks towards non-farm data

The Eurozone continued to dominate the news this morning, as the markets readjusted following Draghi’s non-movement on quantitative easing yesterday.

The Eurozone indices all rallied this morning, recovering after the initial shock of the ECB’s failure to announce firm action by focusing on the more dovish elements of Draghi’s speech. After closing at 9902.2 yesterday, the DAX grew marginally to open at 9901.5, rocking up to 9989.3 after the bell. This comes despite the Bundesbank slashing growth forecasts for Germany, down to 1.4% this year and 1.0% in 2015. 

Germany finds itself in a curious position at the moment; whilst the country is the biggest obstacle in the way of Eurozone QE, the DAX continues to ride on the coattails of any QE-positive comments from Draghi. Due to this, the slashing of inflation targets adds more fuel to the fire of Draghi’s QE push, and therefore allows the DAX to grow, regardless of its home-nation’s opposition to the scheme. As if to illustrate this, the euro, despite its post-conference growth yesterday, has fallen 0.1% against the dollar due to a mix of disappointing European figures and the strength those figures give to promoting the QE cause.

The FTSE similarly recovered from the post-ECB conference malaise that hit the global indices, opening at 6713 after closing Thursday at 6691.2. As the FTSE is susceptible to any negativity stemming from the Eurozone, the more pressure piled onto the ECB to implement quantitative easing is good for the UK index, as a healthy Europe is one less headache for the markets.

The black cloud cast by Draghi yesterday spread over the US yesterday, causing the Dow to fail to reach a new record high. However, the Dow has not fallen for 2 days in a row since the end of October, so it still stands a good chance of reaffirming its record-breaking status at Friday’s close. This will be supported by the rampaging dollar; the currency finally reached the 120 level against the yen yesterday and despite closing just below this level, futures are pointing to the USD/JPY closing above this mark later today.

Yet there is a threat on the horizon in the shape of the non-farm employment change, which is released this afternoon. Joined by the trade balance, unemployment rate and average hourly earnings, this package of data has the potential to be a volatility-causing nightmare for the US markets as investors love to trade on these figures.

Finally, despite the disappointing state of the global markets yesterday, alongside the usual pre-election uncertainty, the Nikkei managed to make its sixth day of gains, closing at 17992.5. Regardless of the turmoil in Japan, the Nikkei is performing in a similar way to the Dow Jones, ignoring much of the economic bad news that comes its way, propelling itself up the charts off the back of its own bullish sentiment.