Thursday, 10 March: UK markets opened mixed, along with Europe as investors and traders awaited the ECB announcement of further stimulus. Mario Draghi briefly appeased UK & Euro area markets as he announced an enhanced QE stimulus package, along with respective cuts of 0.1% to -0.4% and 0.05% to 0.00% in the euro deposit rate and refi rate. Monthly asset purchases were expanded from €60bn to €80bn, as investment grade euro-denominated bonds issued by non-bank companies were added to the basket of QE-eligible assets. A new series of four TLTROs is also scheduled for launch in June 2016. Gold hit an intraday low shortly after the announcement at $1238/oz as markets were unanimously in the green, but markets soon fell into the red in late afternoon trade, as gold rallied to $1268/oz. Brent crude also experienced weakness in the afternoon, trading $1 lower to c. $39.80/bbl.
Conflicting China’s dire balance of trade data earlier in the week, inflation data for last month showed an uptick in CPI as it printed at +1.6% month-on-month. This nudged the year-on-year rate up to +2.3% (vs. +1.8% expected), and by 50bps relative to January, this print was the highest since July 2014. This was driven by a big surge in food prices (+7.3% yoy vs. +4.1% in January), much of which has been attributed to the timing of the Chinese New Year. On the flip side, services inflation slowed last month. Figures from this week serve to highlight the disparities within the Chinese economy, and the complexity of not only the Chinese economy, but its impact on the global economy.
Morrisons traded 4.5% lower after announcing a 27% fall in annual profit to £302m in the year to January 31, compared to analysts’ average forecasts of £307m but in line with guidance from the grocer of £290-310m. The company also announced a final dividend of 3.5p, as investors appreciated the progress made by Morrisons – attributed to a renewed focus on cash flow and continued investment in pricing.
At the close European indices were down with the FTSE 100 -1.78%, with the CAC 40 -1.24%, and the DAX 30 -2.31%.