Markets React to Yellen & Draghi Comments, NFP Numbers & OPEC Meeting Both Later Today
December 4, 2015 8:05 am
European markets took a hit yesterday after Mario Draghi failed to deliver on investor’s expectations. In November the ECB Governor had stated that the ECB would ‘do what we must to raise inflation as quickly as possible’, which investors took to mean the unveiling of a significant surge in monetary stimulus in December. These investors appear to have been let down with Draghi’s announcement yesterday that the current bond-buying programme would continue as it is for another fifteen months at the minimum, together with the news of a new record low interest rate of -0.3%. The Euro surged as it became clear that an increased rate of money-printing was not on the cards, with the common currency rising from below the $1.06 level to above the $1.09 mark.
The marked contrast in monetary policy between the EU and US has rarely been clearer. Janet Yellen’s tone during her testimony to Congress yesterday was one of cautious optimism; in particular, her suggestion that the economy appeared to be nearing a place where it could cope with an interest rate rise fuelled expectations of such a rise when the Fed meets later this month. The Nonfarm Payroll number, due at 13:30 GMT today, may prove crucial to the Fed’s decision – high job numbers could provide a shot in the arm for monetary policy hawks, adding further substance to the view that the US economy finally has the strength to take an interest rate rise in its stride. The S&P500 and Dow were both weighed down by Yellen’s comments – the former closed down by 1.44% at 2,049.62 whilst the latter dropped by 1.42% to 17,477.67. Energy stocks weighed particularly heavily on the US markets, numbering amongst some of the biggest market losers on the day.
Speaking of energy, there is likely to be a significant amount of market focus on today’s OPEC meeting in Vienna, where the organisation will make a decision regarding rate of production. Yesterday the anti-reduction faction appear to have leaked an internal document to the Wall Street Journal, which states that even were OPEC to cut production there would still be a market glut. Brent is currently trading down by 0.18% at 43.76, whilst WTI is up by 0.24% at 41.18
European markets took a hit yesterday after Mario Draghi failed to deliver on investor’s expectations. In November the ECB Governor had stated that the ECB would ‘do what we must to raise inflation as quickly as possible’, which investors took to mean the unveiling of a significant surge in monetary stimulus in December. These investors appear to have been let down with Draghi’s announcement yesterday that the current bond-buying programme would continue as it is for another fifteen months at the minimum, together with the news of a new record low interest rate of -0.3%. The Euro surged as it became clear that an increased rate of money-printing was not on the cards, with the common currency rising from below the $1.06 level to above the $1.09 mark.
The marked contrast in monetary policy between the EU and US has rarely been clearer. Janet Yellen’s tone during her testimony to Congress yesterday was one of cautious optimism; in particular, her suggestion that the economy appeared to be nearing a place where it could cope with an interest rate rise fuelled expectations of such a rise when the Fed meets later this month. The Nonfarm Payroll number, due at 13:30 GMT today, may prove crucial to the Fed’s decision – high job numbers could provide a shot in the arm for monetary policy hawks, adding further substance to the view that the US economy finally has the strength to take an interest rate rise in its stride.
The S&P500 and Dow were both weighed down by Yellen’s comments – the former closed down by 1.44% at 2,049.62 whilst the latter dropped by 1.42% to 17,477.67. Energy stocks weighed particularly heavily on the US markets, numbering amongst some of the biggest market losers on the day.
Speaking of energy, there is likely to be a significant amount of market focus on today’s OPEC meeting in Vienna, where the organisation will make a decision regarding rate of production. Yesterday the anti-reduction faction appear to have leaked an internal document to the Wall Street Journal, which states that even were OPEC to cut production there would still be a market glut. Brent is currently trading down by 0.18% at 43.76, whilst WTI is up by 0.24% at 41.18
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