UK & Europe
It was a mixed bag for European markets as central banks talked down interest rate expectations and the price of oil swung between gains and losses.
Another failed attempt by European Central Bank president Mario Draghi to talk up a policy move at the ECB’s March meeting saw the euro rally and German stocks fall. "The risks of acting too late outweigh the risks of acting too early," Mr Draghi said on Thursday. Super Mario’s special powers to shift the direction of travel for markets have been thrown off by newly dovish rhetoric from the Federal Reserve. His comments were echoed by Executive Board member Mersch who said “We have further possibilities”.
The Bank of England kept interest rates on hold as expected. A change of heart from Ian McCafferty which left votes at 9-0 meant the tone of the decision was a lot more dovish than expected. Lower rates for longer is on the face of it a good thing for stock markets. By waiting longer to raise rates the BOE risks having to hike at a sharper pace or missing the opportunity to hike altogether.
A brief history of Mr McCafferty’s interest rate decision-making show him voting for a rate hike in August 2014, withdrawing it in January 2015, voting again for a hike in August 2015 then giving up again in February 2016. The serial flip-flopping of Ian McCafferty and brief spell of Hawkishness from Martin Weale aside show a continually dovish bias from the MPC despite the strength of the British economy.
A breakout in commodity prices which took gold to a fresh three-month high and copper to its highest in a month put the mining sector firmly at the helm of the FTSE 100. The gains in mining shares were such that today could prove a major turning point for the FTSE 350 mining index which lagged the FTSE 100 for all of 2015.
Shares of Anglo American (L:AAL) and copper miner Antofagasta (L:ANTO) completely lost the plot, jumping over 18% on no company specific news. Royal Dutch Shell (L:RDSa) was amongst the top risers after reporting an 87% slump in annual profits which met muted expectations.
Shares of AstraZeneca slumped over 6% after the pharmaceutical company issued a profit warning for 2016 because of the end of a patent on one of its leading drugs.
US
US stocks opened higher as weak economic data prompted a belief that the Federal Reserve may hold off on raising interest rates.
FX
The US dollar took another caning on Thursday as multiple currencies broke to multi-month highs on a rising belief the Federal Reserve will postpone its plans to raise rates. The latest US economic data supports this belief with weekly jobless claims and durable goods orders missing expectations.
The British pound extended its gains to a near-one month high versus the dollar on “Super Thursday”. McCafferty dropping his call for a rate hike caused an initial sell-off in GBP/USD but dollar bear bought the dip leaving the pair unchanged on the day.
After Mario Draghi’s jawboning failed to send the euro lower, EUR/USD surged to 1.12 for the first time since October.
Commodities
Gold jumped to a three-month high of over $1155 per oz as investors sought the security of hard currency amidst a dovish turn from global central banks that threatens an all-out currency war.
Oil markets were volatile on Thursday as traders pushed the price wildly between gains and losses. There is a residual bearishness in oil markets because of the oversupply demonstrated by the weekly US inventories build but a possible top in the dollar, in which crude contracts are priced could mean we’ve seen the low in oil.
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