Europe
The start of the second full week of 2015 got a bit choppy as recent volatility has left markets unsure which way to go. Shares initially weathered the storm of falling oil prices as risk-assets got a boost thanks to the ECB rumour mill churning out more possible plans for quantitative easing in the Eurozone. After a while the panic selling in oil prices as well as the breakdown in the Ukraine peace talks proved too much and energy shares led stock markets lower.
After disappointment over an internal report that suggested ECB quantitative easing may be in the realm of 500bn euros it was unsurprising to see the rumour mill churning again on Monday. A ‘source‘ has suggested the ECB is set to announce a QE program based on the contributions made from national central banks. Buying according to its capital key was discussed by ECB VP Vitor Constancio in November and is nothing new.
Roche GS (SIX:ROG) announced it will acquire a majority stake in molecular and genomic analysis business ‘Foundation Medicine’. M&A in the healthcare sector was a positive force for European equities in 2014 so even though Roche’s acquisition is relatively small; it’s good to see deals get going again in the New Year.
House builder Taylor Wimpey Plc (LONDON:TW) saw initial gains after raising its full year guidance but subsequently dropped by over 1%. The company is positive on what CEO Pete Redfern called a “more sustainable housing market,” but if house price gains continue to erode, Taylor Wimpey’s 2014 revenue growth is unlikely to be sustained in 2015.
AO World shares jumped after the online electronics retailer announced a 38% spike in revenue during the fourth quarter and reiterated its full-year guidance. The competitive prices and consistent service which held together over Black Friday is ringing well with AO world’s customers.
US
Broker research suggesting $40 oil sent oil prices tumbling on Monday bringing down US energy shares and bullish sentiment with them as the price declines that began on Friday thanks to falling wage growth followed through to Monday.
FX
The US Dollar was the safe-haven currency of choice on Monday as QE from the ECB looks increasingly likely and global dollar-denominated commodities were sold off.
Commodity currencies took the brunt of the pain with the Norwegian krone down over 1.2% thanks to falling oil prices. The New Zealand, Australian and Canadian dollars all came in for heavy selling.
Commodities
Oil prices got crunched with Brent crude down as much as 5%, falling well into new five-year lows on Monday. The fundamental reasons for the oil price decline are well-established. At this point it’s really just panic selling out of fear of how low oil prices could go. Oil prices will find a bottom for emotional reasons, the fundamental reasoning such as by a falling US rig count or a production cut from OPEC alongside non-OPEC members such as Russia and Venezuela will come later.
The strength of the US dollar kept a lid on gains on Gold and Silver. Precious metals was one of the few asset classes in the green on safe-haven demand.
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