Comment: European Markets Add Gains On Stimulus Hopes
March 26, 2014 8:01 am
US consumer confidence data blew the doors off yesterday, reaching a six-year high of 82.3 from 78.3 on the month. The report fuelled risk appetite, helping the DJIA to finish up 0.6% and the S&P500 up around 0.4%. US macros are thawing; data indicators are showing an improvement and markets have had enough time to digest the likelihood of monetary tightening by the Federal Reserve next year. After all, it’s not unreasonable for the Fed to indicate rate hikes as the central bank reins in stimulus on an improving US economy. Asian markets were lifted by the upbeat tone out of the US with investors in China responding warmly to hopes of stimulus measures by the PBoC.
European markets for that reason are exhibiting calm Wednesday, warmed up by advances in global markets overnight and further helped by subsiding worries about the Ukrainian situation [though still highly elevated and a major risk-factor, traders are latching onto the positives] and the prospects of policy easing in the euro zone after Germany’s Bundesbank chief Jens Weidmann signalled he would support a government bond buying programme. Weidmann has vocally opposed an ECB bond-buying programme before, known as a hawk amongst the ECB gave his first indication that the Bundesbank might be open to purchasing government bonds or private sector assets in a bid to tackle deflation.
Financial markets have welcomed the prospects of further stimulus measures amid growing worries about deflation, flagging French and Italian economies and the reluctance by the ECB to stimulate. At the same time, Germany’s IFO was mixed, underling that even the engine of the euro zone’s growth remains vulnerable. Outside of equities, gold continues to add gains, up around 4 bucks at the moment while oil prices tick higher too on the improving appetite for risk. That’s led core government bonds to fall out of favour with UK gilts and German bunds flat lining but in better shape since the market open. Looking ahead, we have US durable goods data and PMI for the services sector as well more Fedspeak which could offer us further clues over the FOMC’s thinking about monetary tightening. Look out for Fed’s Bullard in Hong Kong.
US consumer confidence data blew the doors off yesterday, reaching a six-year high of 82.3 from 78.3 on the month. The report fuelled risk appetite, helping the DJIA to finish up 0.6% and the S&P500 up around 0.4%. US macros are thawing; data indicators are showing an improvement and markets have had enough time to digest the likelihood of monetary tightening by the Federal Reserve next year. After all, it’s not unreasonable for the Fed to indicate rate hikes as the central bank reins in stimulus on an improving US economy. Asian markets were lifted by the upbeat tone out of the US with investors in China responding warmly to hopes of stimulus measures by the PBoC.
European markets for that reason are exhibiting calm Wednesday, warmed up by advances in global markets overnight and further helped by subsiding worries about the Ukrainian situation [though still highly elevated and a major risk-factor, traders are latching onto the positives] and the prospects of policy easing in the euro zone after Germany’s Bundesbank chief Jens Weidmann signalled he would support a government bond buying programme. Weidmann has vocally opposed an ECB bond-buying programme before, known as a hawk amongst the ECB gave his first indication that the Bundesbank might be open to purchasing government bonds or private sector assets in a bid to tackle deflation.
Financial markets have welcomed the prospects of further stimulus measures amid growing worries about deflation, flagging French and Italian economies and the reluctance by the ECB to stimulate. At the same time, Germany’s IFO was mixed, underling that even the engine of the euro zone’s growth remains vulnerable. Outside of equities, gold continues to add gains, up around 4 bucks at the moment while oil prices tick higher too on the improving appetite for risk. That’s led core government bonds to fall out of favour with UK gilts and German bunds flat lining but in better shape since the market open. Looking ahead, we have US durable goods data and PMI for the services sector as well more Fedspeak which could offer us further clues over the FOMC’s thinking about monetary tightening. Look out for Fed’s Bullard in Hong Kong.
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