Markets lower as stimulus expectations fade but Standard Chartered jumps on settlement

European markets were off to a slow start this morning, drawing back from recent rallies. Profit taking is very much the story for the day as traders pause to digest the recent economic data and scale back expectations of central bank stimulus.

Trading volumes are particularly low with investors sitting on the sidelines as they are still not convinced that the risk on trade is the way forward. Despite stronger than expected retail sales from US yesterday and news that both Germany and France avoided contraction in the first quarter there is still a lack of direction and for this reason any rallies tend to be short lived.

Bank of England minutes showed that the Monetary Policy Committee voted 9 – 0 to leave rates unchanged and to leave the asset purchase programme unchanged, adding evidence to the decreasing likelihood of near term central bank action to boost the global economy.

By mid morning the FTSE was trading down 0.6%, the CAC down 0.4% and the DAX down 0.7% whilst some exchanges in Europe were closed for Assumption Day.

In the UK Standard Chartered has dominated the headlines following news that they have reached an agreement to pay the New York Department of Financial Services (DFS) $340m to settle claims that their US subsidiary illegally processed payments for Iran. Although this is the largest sum ever to be paid to an individual regulator for money laundering charges, it is substantially lower than some figures that had been mentioned previously, which had gone as high as $700m.

The markets are particularly pleased that the agreement had been reached so quickly and the fact that Standard Chartered are able to keep their banking license in New York means that confidence still remains in the CEO and a line can be drawn under the entire matter. In response to this Bank of America Merrill Lynch raised their outlook of the bank to buy from neutral.

Standard Chartered had gained 4.6% by mid morning, taking the share price to 1432p, still some way off the pre-Iran problems price of 1602p but much improved from the low one week ago of 1093p.

Tobacco companies exerted a downward on the FTSE after the industry failed to overturn a ruling in Australia which will force Tobacco companies to remove almost all the branding from cigarette packets. The concern for these companies is that other countries may now feel more confident to push forward with similar measures. By mid morning British American Tobacco was down 1.8%.

With little domestic economic data due for release this morning, investors will be looking to US inflation figures released this afternoon.