Financial market research and analysis

The euro takes timid steps below the 1.10 mark against the US dollar on news that the ECB accelerated its sovereign bond purchases to the fastest of the last seven weeks. The ECB bought €63.7 billion worth of Eurozone sovereigns last month, expanding the size of its balance sheet to €2.56 trillion. At the current speed, the ECB’s holdings will likely grow well above the €3 trillion by the end of September 2016, targeted as the hypothetic end date for the current QE program.

The euro has at least a good reason to cheapen. As the yield spread between the US and Eurozone sovereigns widens on diverging Fed/ECB monetary policies, the selling pressures in the euro rises. Certainly, the euro-demand as a funding currency tempers the euro’s depreciation over time, however the mid-long term direction is forthrightly negative.

Even the euro cheapening below 1.10 per dollar has been powerless to attract investors into the European stocks this morning. The DAX stocks underperform in Frankfurt as Volkswagen is once again on the headlines; the US pursues the German giant on its diesel-emission accusations. This time, Porsche comes under the spotlight and Volkswagen refuses the fresh accusations implicating new models, as the very popular Porsche Cayenne. Nonetheless, talks are enough to push the general mood down the hill.


Potential decline in appetite for the US stocks?

Appetite in the US stocks could also deteriorate amid a cheerful start to the week yesterday. Nasdaq 100 hit a fresh all-time high; the SPX needs no more than $30 to refresh record. Yet the S&P placed BoFA, Wells Fargo, JPM, Citi, GS, Bank of NY and MS on ‘negative’ credit watch. The overbought US shares could therefore tend to correct before the US jobs data creep in. The ADP employment report is due tomorrow, the nonfarm payrolls and wages are scheduled for Friday. The market is prepared for weaker data yet interestingly the odds for a December rate hike remain at a solid 50%.