Investors welcomed ECB decision | IFCM
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Investors welcomed ECB decision - 23.1.2015

On Thursday American stocks surged together with the US dollar. Investors welcomed the ECB decision to start euro emission this March. The emission implies buying €60 billion government bonds every month. The QE program will last till September 2016, with total purchases surpassing 1 trillion euro. Market participants believe a part of liquidity will flow to stock markets. Euro plunged yesterday, as the volume of emission surpassed 650 billion, expected by investors. Bank sector showed the biggest growth on American exchange markets. Bank of America and Wells Fargo shares added 3.2% and 4.4%, respectively. American stocks turnover climbed 6% above its monthly average and made up 7.7 billion shares. Today at 14:45 CET Markit will release its Manufacturing PMI index in the USA. At 15:00 СЕТ investors expect Existing Home Sales and Leading indicator to be announced. The outlook is moderately positive.

DAX/DJI

Today European stocks continue to advance and may hit their 7-years record high. Large exporters, i.e. auto makers, take the lead amid plunging euro. BMW and Peugeot Citroen shares are up by 4.4% and 3.7%. Market participants suppose that, with every 10% that euro loses to dollar, motor companies’ profits rise by 6-8%. As in the US, European market favours bank sector. Raiffeisen Bank shares gained 3.9%, Commerzbank added 3.1%. The ECB decision gave rise to optimistic forecasts for European stocks. According to Bank of America-Merril Lynch, European market reached its 50-year low in relation to the American one, on the basis of such fundamental indicators as price/profit ratio and etc. We believe this idea can be used for creating a PCI, such as DAX/DJI and alike. The German DAX was the first this week to break its historical maximum. Today at 9:00 CET Markit will issue a number of PMI indicators in the EU. The tentative outlook is positive. We remind that November, 25 Greece holds parliamentary elections. If the left-wing party Syriza wins, the chances of Greece leaving the EU will grow, adding more pressure against euro.

Nikkei climbed together with other global stock indices. However, strong yen moderated its growth. This week Bank of Japan left its monetary policy unchanged and cut inflation forecasts for this year from 1.7% to 1%. On Monday morning Japan will announce the final Trade balance for December and the BOJ monetary policy meeting minutes of the same month.

Precious metals showed a good growth as expected. But today the surge is slightly driven down from the “psychological” level of $1300 per ounce in the background of strengthening dollar. Please note, that a solid part of western investors continue to expect the gold to slip to $1000, due to Fed rate hike.

Brent

Oil slightly advanced following the death of Saudi Arabia’s king. Later on, OPEC representatives declared oil policy to remain the same and the quotes almost returned back. Nowadays OPEC is producing 30.2 million barrels a day, and Saudi Arabia accounts for 9.5 million of them. US oil production amounts to 9.2 million barrels a day. Let us point out, that Energy Information Administration reported American oil reserves to rise by 10.1 million barrels a day this week reaching the highest growth pace since March 2001.

Corn

Soy prices dropped due to forecasted higher crop in Brazil. Somar bureau expects rainy weather. Corn price is down as investors anticipate that corn ethanol production will decline because of low oil prices. International Grains Council raised its estimates of world corn crop from 982 million tons to 992 million tons in 2014/2015, which also had an impact on corn prices.
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