Europe
The effects of QE wore off in European stocks on Tuesday as concerns over falling oil prices and an early rate hike in US markets filtered back over the pond.
The link between ECB bond purchases and stock markets is indirect with shares rising alongside flows into risky assets. The large rise in US employment during February has brought forward expectations on the timetable for a rate hike and is fuelling risk-off sentiment in equities.
The same could not be said for European bond markets which are directly benefitting from central bank bond purchases. On Monday the purchases were dominated by core countries including Germany and Austria sending the yields on the respective bonds to new lows. On Tuesday; Italian, Spanish and Irish debt all hit record lows as peripheral central banks became more active in the market.
The full extent of weekly purchases by European central banks will be known on Monday when the ECB releases official figures.
The stand-out performer in Europe was Credit Suisse Group AG (SIX:CSGN) which rallied over 7% on the appointment of new CEO, the soon to be-ex Prudential (LONDON:PRU) boss Tidjane Thiam.
UK
UK stocks dropped on Tuesday alongside those in Europe and the US with little new data able sustain the positive momentum built up from the beginning of the European Central Bank’s bond-buying program.
One of the largest drops in Brent crude oil prices seen in a few weeks sent major oil companies tumbling including the likes of Tullow Oil Plc (LONDON:TLW) and BG Group (LONDON:BG). Weak copper prices hurt UK-listed mining companies.
The FTSE 100 fell as much as 1.5% back below 6,800 and towards the lows seen at the end of January dragged down by Prudential (LONDON:PRU) on the news it is losing its CEO to Credit Suisse.
Security group, G4S (COP:G4S) rose over 3% after posting a bigger than expected rise in 2014 profits.
Ocado (LONDON:OCDO) reported a modest acceleration in quarterly profits helping shares gain ground.
US
A drop in oil prices alongside the ever-strengthening US Dollar proved too much for US stocks to handle on Tuesday. The Dow Jones capitulated and fell as much as 200 points in early trading.
Shares in Apple (NASDAQ:AAPL) fell alongside the wider market with investors left insufficiently impressed with the release of the tech giant’s new watch.
Urban Outfitters Inc (NASDAQ:URBN) beat earnings expectations in the fourth quarter while also seeing the first rise in same-store sales in a year sending shares higher.
FX
It was another day of US-dollar strength and euro-weakness on Tuesday, the second day of bond purchases by the European Central Bank.
EUR/USD fell to fresh twelve year lows just above 1.07 as new euros flood the system in order to buy bonds.
USD/JPY rallied to 122, the highest since July 2007 but slid back on profit-taking at the big level ahead of widely followed Japanese Machine orders reported tonight.
GBP/USD is so far holding the 1.50 psychological level but if the strength in the dollar is maintained it may be only a matter of time before it breaks.
Commodities
WTI crude oil has been stuck inside a tight $5 trading range for a couple of weeks and is sitting right in the middle of it on Tuesday. A prominent research note calling for $40 sent prices lower.
The price of Copper slipped back again after yesterday’s rally when it emerged Antofagasta (LONDON:ANTO) will appeal the ruling to close its copper mine.
Gold and Silver were down slightly on US dollar strength, unable to attract safe-haven flows after having left investors shaken from the recent price falls.
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