Greater London, England -- (SBWire) -- 11/02/2010 -- Giles Watts, Head of Equities, City Index (http://www.cityindex.co.uk) commented:
“European markets traded lower by 1% this morning as dollar strength and concerns over the scale of QE2 encouraged investors to trim equity positions.
Much of the recent gains in equity markets have been built on dollar weakness as investors expect the QE2 to be extensive enough to further weaken the US currency and buoy equity markets, but a cautious article overnight in the Wall Street Journal did enough to dampen expectation that any forthcoming monetary policy won’t be as broad as previously thought.
Mining stocks were the biggest drag on the index, as the stronger dollar impinged on commodity prices, with Xstrata and Rio’s topping the negative Leader board. Oil firms also hindered the London market as crude prices drifted on dollar strength with BP and BG all losing one percent, if this dollar strength were to continue we could see indices heavily weighted with commodity stocks such as the FTSE drifting lower still.
Defensive stocks such as United Utilities and Seven Trent topped the Leader board as investors sought refuge in lower risk equities. Banks also provided some respite as clients looked for cheap financials after their recent falls, with Barclays, RBS and Lloyds all posting gains.
Investors are eyeing US data due later this afternoon, with durable goods and new home sales hopefully giving further indication as to the state of the recovery. However given the uncertainty around the scale of QE2, positive macro data could be negative for equities markets as signs of healthy recovery could force the FED to scale back on its QE plans, this would be no bad thing for the economy, but not great for equity markets that have priced in a more extensive easing programme.”
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CFD Trading News: Markets Drift Lower on Dollar Strength and QE Concerns
CFD trading expert Giles Watts of City Index gives his EU Market Update for 27th October