World Markets Await ECB Stimulus Plan

Nichole Harper
19 Jan, 2015
New York City

Markets in Europe gained ahead of ECB meeting later in the week and oil prices closed down in London trading. Shanghai market indexes plunged nearly 8% after regulators limited the margin lending. Yield on 10-year Japanese government bonds dropped to a record low of 0.2%. U.S. markets were closed.

[R]2:25 PM New York – Markets in Europe advanced ahead of ECB meeting later in the week and crude oil prices closed down in London trading. Shanghai market indexes plunged nearly 8% after regulators limited the margin lending. Yield on 10-year Japanese government bonds dropped to a record low of 0.2%. U.S. markets were closed.[/R]

Market indexes in Europe advanced as investors digest the weakening backdrop for oil and commodities prices.

U.S. markets and federal government offices were closed to observe Martin Luther King Jr. birthday.

Bond yields in Europe and Japan traded lower ahead of European Central Bank meeting this week and expectations ran high of a decisive action by the central bank.

Bank of Japan also stepped up its purchase of Japanese government bonds and yield on 10-year bonds dropped to a record low of 0.2%.

Oil price dropped after Iraq’s Oil Minister Adel Abdul Mahdi said that the Middle Eastern nation is pumping record 4 million barrels a day.

Shanghai market index plunged 7.7% after the Chinese regulator curbed margin lending in an attempt to arrest the 40% rise the index in the last three months.

China Securities Regulatory Commission cracked down on margin lending and placed a temporary ban on financing for the three largest brokerage firms.

Trading volume had soared to an unsustainable level in December to 77 billion renminbi or nearly $12.5 billion and has recently dropped but still at elevated level of 22 billion renminbi.

Three state controlled and largest brokerage houses facing temporary ban included Citic Securities, Haitong Securities and Guotai Juan Securities.

Citic released a statement on Sunday and announced number of new measures to limit risk in its margin finance facility and also revised higher minimum account assets for margin facility to 500,000 renminbi or $81,000 from 300,000 renminbi.

Investors are also awaiting economic growth data tomorrow and economists are estimating the growth to slow down to the slowest pace in the last two decades.

On Wall Street trading, Tollbooth Strategy Index jumped 1.2% or 116.61 to 9,827.32.

S&P 500 index gained 26.75 or 1.3% to 2,019.42 and the Nasdaq Composite Index climbed 63.56 or 1.4% to 4,634.38.

European Markets

In London trading, FTSE 100 index rose 0.2% or 16.04 to 6,566.31 and in Frankfurt the DAX index gained 0.6% or 59.62 to 10,227.39.

In Paris, CAC 40 index increased 0.5% or 19.59 to 4,399.21.

European markets advanced to record highs in seven years on the expectations that the European Central Bank will announce measures to buy government bonds at the scheduled meeting on Thursday.

The expectation of an action from the ECB gained additional momentum after French President Francois Hollande said that the central bank will decide this week on the government debt program purchase later this week.

Investors are expecting the bond purchase program to be large and at least of 500 billion euros in size and may extend to corporate bonds as well.

Swiss Market Index rebounded 3.5% despite several brokerages lowered views on several companies after the surprise move by the Swiss National Bank. The market index plunged more than 15% in the last week, the most since the world markets collapse in 2008.

Swiss franc traded near parity to the euro and up 20% before the SNB move to unhinge the currency and let market forces dictate the value.

Balfour Beatty Plc gained 0.9% to 205.90 pence after the U.K.-based infrastructure developer secured an infrastructure development contract worth up to £1.5 billion for the next four years for roads bridges and coastal defense works from Scape.

Deutsche Telekom AG increased 0.8% to €14.16 after the Germany-based telecom company plans to invest about €23.5 billion or $27 billion in the next five-years for its domestic landline and mobile networks and the digitalization of infrastructure.

Asian Markets

Bank of Japan entered the bond market to acquire government bonds and 10-year debt yield fell to a record low of 0.2%. Japanese yen strengthened to a 117.17 against one dollar and industrial output declined 0.5% in November.

Yields on government bonds dropped to a new low after Bank of Japan stepped up its purchase of bonds to ward of deflation forces and revive inflation in the stalled economy.

Bank of Japan today entered the market and looked to acquire 780 billion yen or $6.7 billion Japanese government debt of various maturities.

The yield of 10-year bonds fell four basis points to a record low of 0.2% and 20-year bond declined 0.865%, according to the data available from Japan Bond Trading Co.

The central bank’s action in the last year lifted bonds by 4.7% as the BoJ announced plans to offer unprecedented monetary stimulus.

The Ministry of Economy, Trade and Industry said seasonally adjusted industrial output in November dropped 0.5% from revised fall of 0.6% in a month ago.

For the year, industrial production declined 3.7% compared to a decrease of 0.8% in October.

The index of shipments for the month was unchanged at 1.4%, while the inventory index increased 1.1% compared to a preliminary estimate of 1% increase.

According to the Japan Department Stores Association, department store sales in December dropped 1.7% from a year ago month from 1% decrease in November.

The Nikkei 225 Stock Average jumped 150.13 or 0.9% to 17,014.29 and the broader Topix index increased 8.68 to 1,372.41.

The yen gained to close at 117.17 against one dollar.

In Mumbai trading, Sensex Index advanced 140.12 or 0.5% to close at 28,262.01. The CNX Nifty increased 36.90 or 0.4% to 8,550.70.

Market indexes in Mumbai advanced rupee gained for the third day in a row.

Indian rupee strengthened to 61.71 and continued its ascent against the dollar and the euro.

Hindustan Unilever Limited declined 5.3% to Rs 892.80 after the consumer goods provider said net in the third-quarter jumped17.87% to Rs 1,252.17 crore.

Total revenues rose 7.17% to Rs 7,894.39 crore.

Mahindra & Mahindra Financial Services Limited tumbled 6.8% to Rs 287.15 after the financial service provider reported net in the third-quarter slipped 14% to Rs 157 crore.

Net revenues jumped 12% to Rs 1,522 crore.

NTPC Limited increased 1.1% to Rs 141.90 after the power distributor signed a term loan agreement for about Rs 10,000 crore with State Bank of India.

Reliance Industries Limited rose 1.3% to Rs 879.85 after the conglomerate said net in the third-quarter slipped 4.5% to 5,256 crore.

Revenues plunged 20.4% to Rs 96,330 crore.

Wipro Limited climbed 5.3% to Rs 584.45 after the software and business process services provider said net in the third-quarter advanced 9% to Rs 2,190 crore.

Net revenues increased 6% to Rs 11,990 crore.