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Europe Preparing for Quantitative Easing
ETFS Multi-Asset Weekly Europe Preparing for Quantitative Easing
Highlights
Persistent cold forecasts drive up natural gas prices
Hopes of quantitative easing boost European equities.
Shock and awe. The SNB’s surprise moves on Thursday sent the Swiss Franc close to parity with the Euro, a 17% movement in the pair on the day.
The Swiss National Bank shocked the market by removing its 1.20 cap on the Swiss Franc against the Euro. Central banks will remain in the limelight with the European Central Bank widely expected to announce full-blown quantitative easing this week after years of resisting following the US on this path. Discussion of the modalities of the programme will no doubt drive asset price rallies – the direction dependent on how inclusive or restrictive the programme will be. Meanwhile a raft of Chinese data releases including Q4 2014 GDP will be closely observed as the market looks for further cues on where global growth will go in 2015.
Commodities
Persistent cold forecasts drive up natural gas prices. Natural gas prices surged 6.7% on predictions that cold weather conditions in the US would continue into the upcoming week. This raised market expectations of increased heating demand from the Northeast and Midwest regions of the US. Conversely, copper ended the week down -7.7% amidst selling on Asian markets spurred by the World Bank reducing its forecasts for global growth this year to 3.0% from 3.4% previously. Copper is broadly considered a barometer for global economic health due to its broad industrial applications. Finally, crude benchmarks continued to fall this week with Brent and WTI ending the week down -7.3% and -5.0% respectively as US crude inventory figures showed that oil stores are at their highest levels in 80 years . The asymmetric decline in prices caused WTI to temporarily trade at a premium to Brent, reflecting early signs that current falling prices are causing US producers to curb production.
Equities
Hopes of quantitative easing boost European equities. A ruling by the European Court of Justice increased the likelihood that a QE program will be revealed at the next central bank meeting on the 22nd January. Markets cheered the move sending European stocks higher with the German DAX rallying 1.9% in the week. The QE program is aimed at preventing the Eurozone slipping into deflation as energy prices continue to fall. Bullion ended the week up 3.6% as market volatility stimulated safe haven demand following a shock announcement by the Swiss National Bank (SNB) stating that it was abandoning its currency cap of 1.2 CHF against the Euro. The rise in the gold price buoyed the DAXglobal Gold Mining Index which finished the week up 8.3%. Both the FTSE 100 and the Solactive US Energy Infrastructure MLP Index were dragged lower by falling copper and oil prices.
Currencies
Shock and awe. The SNB’s surprise moves on Thursday sent the Swiss Franc close to parity with the Euro, a 17% movement in the pair on the day. The Swiss central bank is no doubt preparing for the European Central Bank’s (ECB’s) full-blown quantitative easing (QE) programme which is widely expected to be announced this week at ECB’s policy meeting. In contrast to the US Federal Reserve, which had trodden on this path before, the ECB will need to buy sovereign debts from many Member States. There are many questions that will need to be answered in this policy meeting: How big will the programme will be?; Which country’s bonds will it buy?; Will the ECB buy the bonds itself or delegate the task to the Member States’ national central banks? After the SNB’s moves last week, the Euro had appeared to price in a fairly aggressive move by the ECB and any disappointment in the scale of the programme could drive the Euro higher over the short term.
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Den amerikanska centralbanken Federal Reserve sänkte räntorna med 0,25 % i veckan– men vad kan det betyda för den amerikanska aktiemarknaden?
Detta diagram följer S&P 500-indexet (orange linje) mot amerikanska räntor (blå linje) sedan 1990-talet.
Här är vad som hände med aktierna de senaste gångerna Fed började sänka räntorna från tidigare ränte”toppar”:
• 1995: aktierna steg (före dotcom-bubblan).
• 2000: aktierna föll (dotcom-bubblan sprack).
• 2007: ytterligare en björnmarknad (före finanskrisen 2008).
• 2019: aktierna steg först (sedan föll de in i Covid-kraschen 2020).
Fyra av fem gånger sammanföll räntesänkningarna med stora nedgångar. Men orsakerna var alltid olika. Korrelation innebär inte kausalitet.
Och nu, 2024/25, befinner vi oss i en ny sänkningscykel. Aktierna sjönk med cirka 20 % i början av 2025, men har sedan dess stigit till nya toppar. Frågan är, vad händer härnäst?
IncomeShares S&P500 Options (0DTE) ETP har exponering mot S&P 500 och säljer dagliga säljoptioner för potentiell inkomst.
Följ IncomeShares EU för marknadsinsikter.
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