Markets advance in anticipation of the ECB meeting - 20.1.2015

US stock markets were closed on Monday for the Martin Luther King Jr. holiday. When trading resumes today investor attention will likely be focused on earnings reports of big corporations like Morgan Stanley, Johnson & Johnson, IBM and Netflix. Today at 16:00 CET the January Housing Market Index by National Association of House Builders will be released in US. The Home Builders confidence index, which is seen as a proxy on housing construction, has been above 50 for 6 straight months and is expected to rise to 58 from 57 in December. The tentative outlook is positive for US dollar.

European stocks rose on Monday on expectations the European Central Bank will announce broad measures for expanding the monetary stimulus program at its meeting on Thursday. The Stoxx Europe 600 posted its highest close in seven years. Investor sentiment was boosted after French President François Hollande said policy makers at the ECB meeting on Thursday “will take the decision to buy sovereign debt, which will provide significant liquidity to the European economy and create a movement that is favorable to growth.” In a note released on Monday Societe Generale projected the quantitative easing package will eventually include 400 billion euros ($465 billion) of private assets, and €500 billion to €600 billion of sovereign bonds. Market participants on the other hand are concerned the additional stimulus measures announced by the ECB at its policy meeting will fall short of analyst forecasts as the euro advanced against the dollar. The euro will likely trade sideways till the ECB meeting clarifies further policy actions by the regulator. Today at 08:00 CET the German and Euro-zone Zew Economic Sentiment Index for January will be published. The indicators are expected to grow and the tentative outlook is positive for euro.

Nikkei is rising today after better than expected growth data were released in China and investors weighed the prospect of further monetary easing measures by the ECB. China’s GDP rose 7.4 percent in 2014 from a year earlier, and the industrial production last month grew 7.9 percent from a year earlier, compared with a 7.4 percent forecast. The yen declined for a third day versus the dollar as better than expected growth data from China reduced the demand for haven assets. Tomorrow morning at 01:00 CET Bank of Japan Monetary Policy Statement is expected.

Oil fell on Monday as J.P. Morgan cut its 2015 average Brent crude price forecast to $49 a barrel from $82, saying in a note oil could trough in March at an average of $38 a barrel followed by a U-shaped recovery, rising to $90 a barrel in 2019. There are no signs the global demand will rise in the near term to clear the supply glut on the backdrop of the global economy slowdown. The International Monetary Fund cut its 2015 global growth forecast to 3.5 percent from an earlier estimate of 3.8 percent and revised downward its China outlook to 6.8 percent from 7.1 percent.

Gold prices are rising today after slipping on Monday. Weak equity markets and the prospect of further stimulus measures from ECB contribute to sustained safe haven demand for gold. Copper is rising today after better-than-expected growth data in China, the world’s largest consumer.