Europe
The day started somewhat in the doldrums after Wednesday’s Eurogroup meeting failed to come up with the goods for a resolution on Greek’s bailout. Stocks in Europe turned around when a ceasefire was agreed for eastern Ukraine and Sweden introduced new unconventional monetary policies.
Greek Prime Minister Tsipras reportedly put the kibosh on an agreed statement between European Finance Ministers at Wednesday’s Eurogroup meeting press conference leaving the negotiations rolling over until the next meeting on Monday.
Russian President Putin has announced all parties at the Minsk peace talks have agreed on a ceasefire between Ukraine and eastern rebels starting February 15. The fighting in Ukraine had been escalating in recent weeks and risked bubbling over to financial markets so the ceasefire takes another impediment to higher stock prices out of the picture.
The Xetra DAX, an index that includes a number of big exporters to Russia and is a proxy for the German economy that does a lot of trade with Russia ripped higher on the ceasefire announcement.
The main equity benchmark in Sweden, the OMX jumped to a new all-time high after its central bank announced negative interest rates and a quantitative easing program. The Riksbank cut its repo rate to -0.1% and will purchase SK 10bn in bonds. As has happened in other economies, some of the additional krona created will likely make its way into Swedish stocks so the reaction from markets today is front running that phenomenon.
Credit Suisse Group N (SIX:CSGN) shares gained near-on 10% after the bank beat quarterly earnings estimates and outlined a plan to deal with the appreciation of the Swiss franc.
UK
UK stocks were helped towards modest gains on Thursday by stimulus introduced in Sweden and a nuanced Bank of England inflation report that indicated higher growth but lower inflation that could prompt further monetary easing.
The Bank of England inflation report was generally fairly neutral and didn’t impact markets too heavily, which is likely what Governor Mark Carney will have wanted. The report suggested inflation could drop below zero thanks to falling oil prices which reduces the need to hike rates this year but forecasted CPI will turn around to exceed the 2% target by 2018.
A dividend-boost and a $2bn share buyback from Rio Tinto and a rally in copper prices pushed the mining sector towards the top of the FTSE 100 while BT Group (LONDON:BT) shares traded lower after it started a £1bn share placing which it had already announced would fund its EE takeover
Around 6,790 has attracted buying interest in the FTSE 100 for the previous four trading sessions. Despite the problems in Europe, UK stocks have been trading just below all-time highs suggesting that even a temporary agreement with Greece could spark the next leg higher.
Rio Tinto (LONDON:RIO) shares got a boost with the mining company having taken extra measures to secure its dividend, buyback program and cash flows by slashing costs, capital spending and debt.
US
Stocks in the US were broadly higher despite disappointing retail sales data that showed a bigger decline than expected in January after good earnings and favourable international developments in Ukraine and Sweden.
Tesla Motors Inc (NASDAQ:TSLA) shares dropped after earnings released overnight saw the electronic car company report an unexpected loss and lower than forecast revenues alongside lower car sales in China.
Cisco Systems Inc (NASDAQ:CSCO) shares got a pop higher on the open after the tech giant and Dow component beat top and bottom line estimates in a generally strong report.
FX
The US dollar was sharply lower across the board on Thursday after disappointing retail sales numbers put a question mark over the strength of the US economy suggested by the fall in unemployment.
In good news for IKEA shoppers, the Swedish krona was the standout faller on Thursday after the Riksbank introduced NIRP and QE to fend off deflation.
SEK/USD has been setting multi-year lows against the euro and the US dollar so the Riksbank action is not so much geared towards devaluing the currency but rather an effort to flight deflation brought on by weak trade with Europe and lower oil prices.
Cable has gained over 120 pips on what some perceived to be a more hawkish Bank of England and weak US retail sales that fell by -0.8% rather than the -0.4% expected. GBP/USD has exceeded its Feb 6 peak but is running into some resistance from the 50 day moving average.
Commodities
Crude oil rallied back higher on Thursday in part thanks to a drop in the US dollar as investors were reluctant to drive prices back through the 20 day moving average after two steep days of declines.
Renewed risk-taking after the ceasefire in Ukraine allowed copper to renew its recent short-covering rally from the multi-year lows formed in January.
CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.