ECB Day

European stocks are pointing to a mostly positive start on Thursday following a strong finish on Wall Street overnight, although caution lingers ahead of the ECB monetary policy announcement.

Uptrend 3

European stocks are pointing to a mostly positive start on Thursday following a strong finish on Wall Street overnight, although caution lingers ahead of the ECB monetary policy announcement.

Overnight the tech heavy Nasdaq reported is strongest rise in over 4 months, surging 2.7% snapping a three-day losing streak which had traders questioning the valuations of big tech stocks. The Dow Jones & S&P 500 closed +1.6% and 2% higher respectively. It’s still early days and too early to make a call either way, this could just be a healthy correction in tech stocks, although this could also be the start of a longer-term rotation out of these stocks.

ECB to talk down the Euro?
All eyes will now turn to the ECB who will announce their monetary policy decision at 11:45 GMT followed by a news conference from Christine Lagarde. The ECB are not expected to adjust policy at this meeting so the focus will be firmly on the new economic projections and comments from Christine Lagarde. 

It was reported yesterday that the ECB were confident in the outlook for the bloc’s recovery, the upbeat comments sent the EURO higher. However, attention will also be on Christine Lagarde and whether she will build on Chief Economist Philp Lane’s concerns over the strength of the Euro.  Will Christine Large try to talk down the value of the Euro in light of how important the export sector is to the bloc. 

Oil is on the back foot in early trade, unable to shake off lingering concerns over the demand outlook, particularly as the US driving season comes to an end. A rise in inventories has fuelled these concerns further. The API reported 2.97 million barrel build in crude stockpiles, following a 1.4 million draw expected. EIA data is expected later today. WTI 

US jobless claims
Looking ahead attention will shift to the US labour market. Investors will be scanning the market for signs that the US labour market recovery remains on track. Initial claims are expected to slip slightly lower to 846k, down from 881k. The is would represent a slow recovery but at least it still represents a recovery.

FTSE housebuilders
On the FTSE, housebuilders could find support after RICS data revealed that the post lockdown jump in house prices continued in August, with prices surging to a 4 year high. According to the Institute of Chartered Surveyors (RICS) prices soared +44 in August from +13 in July. We still consider this to be a false dawn with house prices likely to come under pressure as unemployment rises. House builders are cyclical, a prolonged recession could drag on this sector.

FTSE Chart

More from FTSE 100

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.