Monthly Archives: January 2015

Market Insights 1/31/2015

Bulls Down and Out as Bears Take First Round of Twelve

The U.S. equity markets closed the trading day sharply lower as losses for stocks developed early-on in the wake of a softer-than-expected preliminary read on 4Q GDP. Another volatile session ensued as a late-afternoon surge in WTI crude oil prices allowed stocks to temporarily reverse course but fell short of persuading a positive finish. Additionally, a flare-up in Greek debt concerns may have added to the downbeat sentiment.

Treasuries rallied following the GDP report, which may have overshadowed relatively upbeat reads on domestic consumer sentiment and Midwest manufacturing activity while gold traded higher and U.S. dollar was nearly unchanged..

In earnings news, Amazon.com easily bested bottomline expectations, Google dressed up its disappointing quarterly results with some upbeat commentary from management and Deckers Outdoor posted softer-than-expected results and lowered its full-year guidance. In other equity news, Dow member Visa topped the Street’s quarterly expectations, while fellow Dow component Chevron topped 4Q estimates, but suspended its share-repurchase program and cut its 2015 budget.

The Markets…

The Dow Jones Industrial Average dropped 252 points (1.4%) to 17,165

The S&P 500 Index declined 26 points (1.3%) to 1,995

The Nasdaq Composite fell 48 points (1.0%) to 4,635

In moderately heavy volume, 1.2 billion shares were traded on the NYSE, and 2.2 billion shares changed hands on the Nasdaq

WTI crude oil surged $3.71 to $48.24 per barrel, wholesale gasoline gained $0.09 to $1.48 per gallon

The Bloomberg gold spot price moved $26.33 higher to $1,283.60 per ounce

Markets were lower on the week, as the DJIA dropped 2.9%, the S&P 500 Index fell 2.8% and the Nasdaq Composite Index declined 2.6%

First look at 4Q GDP misses forecasts, while consumer sentiment revised slightly lower

The first look (of three) at 4Q Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter annualized rate of expansion of 2.6%, from the 5.0% expansion in 3Q, and below the 3.0% growth that was forecasted by economists surveyed by Bloomberg. 2014 GDP growth was 2.4% higher y/y, the most in four years, per Bloomberg. However, 4Q personal consumption came in north of forecasts, rising 4.3%—the largest increase since 1Q 2006—following the 3.2% increase recorded in 3Q, and versus the 4.0% gain that was projected. The softer-than-expected report came as the strong personal consumption growth was partially offset by fixed business investment decelerating to an annualized rate of 2.3% from the 7.7% pace in 3Q, while the trade gap widened as imports rose three times faster than exports, likely due to the recent surge in the U.S. dollar. Meanwhile, inventories jumped to boost GDP, while government spending decreased.

On inflation, the GDP Price Index came in much cooler than expected at a flat rate from the 1.4% advance seen in 3Q, and compared to the 0.9% increase that economists anticipated, while the core PCE Index, which excludes food and energy, rose 1.1%, matching expectations, and following the 1.4% growth in 3Q.

The final University of Michigan Consumer Sentiment Index was revised modestly lower to 98.1 from the preliminary level of 98.2 for January, versus an unadjusted figure that was expected, but the level was solidly above the 93.6 reading posted in December. The report came as the component pertaining to current economic conditions was revised higher, offset by a downward adjustment to the economic outlook portion. On inflation, the 1-year expectation was revised higher to 2.5% from 2.4%, and compared to December’s 2.8% figure, while the 5-year inflation outlook was unadjusted at 2.8%, inline with the rate posted last month.

Treasuries were solidly higher following the GDP data, with the yield on the 2-year note decreasing 6 basis points to 0.46%, the yield on the 10-year note dropping 10 bps to 1.66%, and the 30-year bond rate falling 8 bps to 2.24%.

European stocks lower, Asia mixed on heavy data

The European equity markets traded mostly to the downside, with sentiment getting hamstrung by another decline in Eurozone consumer price inflation, which fell more than expected month-over-month in January, as well as the softer-than-expected U.S. 4Q GDP report. A flare-up in Greek debt concerns dampened sentiment after the nation’s finance chief said late in the day following a meeting with the Eurogroup president that it will not cooperate with the Troika—the EU, IMF and ECB—and will not seek an extension to the country’s bailout program. Greek stocks reversed early gains and finished lower, while the nation’s bonds saw heavy pressure.

In other economic news, German retail sales rose at a slightly smaller rate than anticipated for December, while Spanish preliminary 4Q GDP growth topped forecasts and French consumer spending rose much more than projected for last month. Meanwhile, the Eurozone unemployment rate unexpectedly dipped to 11.4% in December, from 11.5% in the previous month, where economists had expected the rate to remain. Finally, Russia’s central bank unexpectedly cut its benchmark interest rate to 15.0% from 17.0%, with the move coming just one-month after the central bank surprisingly raised its interest rate.

The U.K. FTSE 100 Index was down 0.9%, Germany’s DAX Index and Italy’s FTSE MIB Index declined 0.4%, France’s CAC-40 Index and Switzerland’s Swiss Market Index decreased 0.6%, Spain’s IBEX 35 Index descended 1.0%, Russia’s RTS Index dropped 1.4% on a U.S. dollar denominated basis, and Greece’s ASE Index fell 1.6%.

Market Insights 1/28/2015

Patient Fed Concerns Equities

The U.S. equity markets closed the day’s session on a downward drift as stocks rose in morning trading on optimism juiced from Apple’s stronger-than-expected quarterly results only to fall sharply following a patient afternoon Fed policy statement.

Treasuries were higher on the dip in stocks and Central Bank announcement, while the economic calendar showed a decline in weekly mortgage applications. Meanwhile, gold and crude oil prices were lower, while the U.S. dollar gained ground.

In other earnings news, Dow member Boeing easily topped the Street’s quarterly projections and Dow member AT&T posted slightly better-than-expected profits, while Yahoo beat earnings forecasts and announced plans to spin-off its remaining holdings in Alibaba Group.

The Markets…

The Dow Jones Industrial Average declined 196 points (1.1%) to 17,19%

The S&P 500 Index fell 27 points (1.4%) to 2,002, all 10 S&P sectos were lower with energy suffering the deppest loss as it gave back nearly 4% on higher global oil inventories.

The Nasdaq Composite dropped 44 points (0.9%) to 4,638

In moderate volume, 856 million shares were traded on the NYSE, and 2.1 billion shares changed hands on the Nasdaq

WTI crude oil fell $1.78 to $44.45 per barrel, wholesale gasoline was unchanged at $1.38 per gallon

The Bloomberg gold spot price moved $6.57 lower to $1,285.77 per ounce

Fed indicates solid economic expansion, mortgage applications snap string of solid gains

The Federal Reserve Open Market Committee (FOMC) concluded its two-day meeting, releasing its policy statement which carried a similar tune to its December meeting release, though a few notes did differ. As expected, the Fed made no change to its target to keep interest rates near zero and stayed the course on its guidance that “the Committee judges that it can be patient in beginning to normalize the stance of monetary policy.” The Fed did update its outlook, stating that economic activity has been expanding at a solid, rather than moderate, pace and indicated that job gains have been strong.

The Fed is clearly the story in 2015 with many expecting a hike in rates this year. Lower energy prices, a stronger dollar and weak glbal growth all have the potential to disrupt those plans, although at this stage we still believe a hike will occur sometime in the second half of the year. But with a more dovish voting block and the aforementioned risks, it doesn’t seem like the slam dunk it might have just a couple of months ago.

The MBA Mortgage Application Index declined 3.2% last week, after jumping by 16.1% in the previous week. This snapped a string of three-straight sizeable weekly increases, as a 5.1% decrease in the Refinance Index was accompanied by a 0.1% dip for the Purchase Index, with the average 30-year mortgage rate rising 3 basis points to 3.83%.

Treasuries were higher following the Fed statement, with the yield on the 2-year note dropping 5 bps to 0.47%, the yield on the 10-year note declining 10 bps to 1.72% and the 30-year bond rate falling 11 bps to 2.29%.

Tomorrow, the U.S. economic calendar will deliver its latest report on weekly initial jobless claims, expected to decrease to a level of 300,000 from 307,000. Additionally, we will also receive the latest read on pending home sales, with economists expecting the pipeline of existing home sales to increase 0.5% m/m during December, following the 0.8% rise seen in November.

Europe and Asia mixed

The European equity markets finished mixed, with sharp losses for Greek banks weighing on the nation’s markets on continued political fallout from last weekend’s election results, while oil & gas issues traded lower, with crude oil prices seeing some pressure. Traders were cautious ahead of today’s monetary policy decision from the U.S. Federal Reserve, but technology stocks found some support following Apple’s much stronger-than-expected quarterly results in the U.S. last night. In economic news, German consumer confidence improved slightly more than expected for February, while Germany’s import prices declined more than expected in December and French consumer confidence held steady versus a projected modest improvement for this month.

Stocks in Asia finished mixed with most markets able to overcome early losses that developed amid the flood of disappointing earnings reports from the U.S. and Europe, while traders exercised some caution ahead of the Fed’s monetary policy decision. In Japan, export-related stocks aided a mild advance as the yen weakened, while Chinese equities continued their pullback from recent highs in the wake of Monday’s drop in the nation’s industrial profits for December. Finally, a report from Australia showed consumer price inflation Down Under came in cooler than expected for 4Q.

The international economic docket for tomorrow will offer retail sales from Japan and consumer confidence from the eurozone and Italy, as well as regional and national CPI reads from Germany

Apple Blows the Top Off

Apple reported a blockbuster quarter on Tuesday, blowing past Wall Street’s most optimistic expectations.

The company sold almost 9 million more iPhones –Nearly 75 million iPhones and 21 million iPads — than expected, while its cash pile ballooned to the point that it could buy about 480 of the S&P 500 companies outright.

Shares rose 5 percent in after-hours trading.

“I think the runaway success of the iPhone 6 plus and that huge hunger particularly in Asia for the large form factor screen is the runaway story of why this set of numbers is so strong,” said Max Wolff, chief economist at Manhattan Venture Partners, in a “Closing Bell” interview.

Apple Chief Financial Officer Luca Maestri told Reuters that the company’s China revenue grew 70 percent and that it was not concerned about an economic slowdown there eating into results.

Apple reported earnings of $3.06 per share on revenue of $74.6 billion. Both were records.

Analysts had expected Apple to report earnings of about $2.60 a share on $67.69 billion in revenue, according to a consensus estimate from Thomson Reuters.

Market Insights 1/27/2015

Earnings Spook Markets

Despite a better-than-expected new home sales report and the highest reading in consumer confidence since August 2007, a plethora of disappointing earnings results and a surprising decline in durable goods orders appeared to be in the driver’s seat for today’s market direction, with U.S. equities finishing solidly lower.

Treasuries ended higher amid the tumble in stocks and conflicting economic data, which also included better-than-expected reads on U.S. services sector activity and home prices, and a slight deceleration in manufacturing activity in the Mid-Atlantic.

Dow Jones Industrials members made up the bulk of the earnings letdowns, with few posting results that bested the Street’s expectations, while others fell short and/or disappointed with their respective guidance, pressuring all but one member of the blue-chip index into the red. Gold and crude oil prices were higher, while the U.S. dollar came under some pressure.

The Markets…

The Dow Jones Industrial Average tumbled 291 points (1.7%) to 17,387

The S&P 500 Index fell 28 points (1.3%) to 2,057, the one positive sector on the day was Utilities +.14%, while technology suffered the deepest losses on the day giving back 2.88%. Other notable sectors included Energy -.06%, Materials -.68% and Consumer Staples -1.15%

Small and MidCaps did not suffer as much as their larger cousins with the MidCap 400 down .64% and the SmallCap 600 down .57%

The Nasdaq Composite plummeted 90 points (1.9%) to 4,682

In moderate volume, 704 million shares were traded on the NYSE, and 1.9 billion shares changed hands on the Nasdaq

WTI crude oil rose $1.08 to $46.23 per barrel, wholesale gasoline gained $0.03 to $1.38 per gallon

The Bloomberg gold spot price moved $12.00 higher to $1,293.39 per ounce

Notable Earnings Announcements

Dow member Microsoft Corp. reported fiscal 2Q earnings-per-share (EPS) ex-items of $0.73, two cents above the consensus estimate of analysts surveyed by FactSet, as revenues rose 8.0% year-over-year to $26.5 billion, exceeding the $26.3 billion that the Street had expected. MSFT issued disappointing 3Q revenue guidance, saying it expects sales to be negatively impacted by foreign exchange. Shares of MSFT are lower.

Dow component Procter & Gamble Co. posted fiscal 2Q EPS ex-items of $1.06, below the $1.13 that the Street had projected, with revenues decreasing 4.0% y/y to $20.2 billion, versus the $20.6 billion that analysts had estimated. PG lowered its full-year earnings guidance. PG is trading solidly lower.

Dow member Caterpillar Inc. reported 4Q adjusted profits of $1.35 per share, well below the $1.55 that analysts had expected, as revenues declined 1.0% y/y to $14.2 billion, roughly inline with what the Street had estimated. CAT issued full-year guidance that was sizably below expectations. CAT is trading decisively lower.

Dow component 3M Co. announced 4Q EPS of $1.81, one penny above the Street’s forecasts, as revenues grew 2.0% y/y to $7.7 billion, below the $7.8 billion that analysts had projected. The company reaffirmed its full-year EPS outlook. MMM is moving lower, but flirted with positive territory in early action.

Dow member Pfizer Inc. posted 4Q earnings ex-items of $0.54 per share, one cent north of expectations, with revenues declining 3.0% y/y to $13.1 billion, compared to the $12.9 billion forecast. PFE issued full-year guidance that missed estimates. PFE is trading higher.

Dow component DuPont reported 4Q EPS of $0.71, roughly inline with estimates, as revenues declined 5.0% y/y to $7.4 billion, below the $7.8 billion that was anticipated. DD issued disappointing EPS guidance, noting that currency will have a significant negative impact, and shares are seeing pressure.

Dow member United Technologies Corp. announced 4Q profits of $1.62 per share, roughly inline with estimates, as revenues increased 1.0% y/y to $17.0 billion, below the $17.1 billion estimate. UTX lowered its full-year guidance, citing continuing strength of the U.S. dollar. UTX is trading lower.

Durable goods orders unexpectedly drop, while Consumer Confidence jumps

Durable goods orders fell 3.4% month-over-month in December, compared to the 0.3% increase that was expected by economists surveyed by Bloomberg, while November’s 0.7% decline was revised sharply lower to a 2.1% drop. Ex-transportation, orders declined 0.8% m/m in December, versus the forecast of a 0.6% gain, while November’s figure was downwardly revised to a 1.3% decrease, from the 0.4% decline initially reported. Finally, orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, declined 0.6% last month, compared to the 0.9% increase that was projected, while the flat reading in November was revised to a 0.6% decrease. The report is typically volatile on a m/m basis, and the disappointing data was led by sharp drops in aircraft and parts, while manufacturing, machinery and computer-related orders also posted solid declines, more than offsetting gains for electrical equipment and appliances and fabricated metal products.

The Consumer Confidence Index jumped to 102.9 in January—the highest since August 2007—from an upwardly revised 93.1 in December and compared to the projected 95.5 level of economists. The improved confidence came amid solid m/m gains for the components pertaining to the present situation and expectations of business conditions. Finally, on employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—improved to -5.2 from -10.1 last month.

New home sales rose 11.6% m/m in December, to an annual rate of 481,000 units from November’s downwardly revised 431,000 unit pace, and compared to the expected 450,000 rate. Within the report, the median home price rose 8.2% y/y and was up 2.2% m/m at $298,100. The 219,000 units of new home inventory was 17.1% higher y/y, representing a rate of 5.5 months of supply at the current sales pace, down from the 6.0 figure posted for the previous month. New home sales are considered a timely indicator of conditions in the housing market as they are based on contract signings instead of closings. Regionally, m/m sales in the Midwest fell 11.5%, while Northeast sales surged 53.6%, the South saw a 17.7% increase, and sales in the West were 3.1% higher.

The 20-city composite S&P/Case-Shiller Home Price Index showed a gain in home prices of 4.3% y/y in November, matching the increase that economists had expected. Moreover, m/m, home prices were higher by 0.7% on a seasonally adjusted basis for November, above forecasts calling for a 0.6% increase.

Treasuries were higher, with yields lower, following the disappointing earnings and durable goods data, as the yields on the 2-year and the 10-year notes, as well as the 30-year bond declined 2 basis points (bps) to 0.50%,1.81% and 2.37%, respectively.

The preliminary Markit U.S. Services PMI Index showed growth in the sector accelerated more than expected, rising to 54.0 in January from 53.3 in December, and compared to the modest increase to 53.8 that economists had expected, with a reading above 50 denoting expansion. Markit said services activity growth accelerated from December’s 10-month low and input costs fell to survey lows, but new business expansion eased to a survey record low. The release is independent and differs from the Institute for Supply Management’s (ISM) non-Manufacturing Index, as it has less historic value and Markit weights its index components differently. Markit’s services sector gauge is the companion to its manufacturing index, which earlier this week unexpectedly declined, decreasing to 53.7 from 53.9 in December.

The Richmond Fed Manufacturing Activity Index showed growth in the Mid-Atlantic region decelerated by a smaller amount than expected in January, dipping to a level of 6 from 7 in December, versus economists’ forecast of 5, with a reading above zero depicting expansion.

Today’s mixed data comes as the Fed begins its two-day monetary policy meeting. In our view, the Fed will extend the time frame for rate hikes while lowering the expectation for the eventual peak in the Fed funds rate. Many experts are now following our call of the 1st rate hike being pushed into early 2016.

Europe under pressure on disappointing earnings reports on both sides of the pond

The European equity markets finished the trading session mostly lower, as some disappointing earnings reports in the region were accompanied by the plethora of negative profit releases in the U.S. Siemens AG (SIEGY $110) was solidly lower after the German engineering firm posted a drop in profits, while Philips NV (PHG $29) fell sharply after issuing a full-year warning. Sentiment was seemingly bogged down by the lackluster read on U.S. durable goods orders and Chinese industrial profits. Greek stocks tumbled again in the wake of the weekend election that resulted in an anti-austerity party victory. In some regional economic news, preliminary U.K. 4Q GDP expanded at a 0.5% quarter-over-quarter pace, missing the 0.6% growth that was projected, and slowing from the 0.7% increase posted in 3Q.

The U.K. FTSE 100 Index was down 0.6%, Germany’s DAX Index dropped 1.6%, France’s CAC-40 Index declined 1.1%, Italy’s FTSE MIB Index decreased 0.5%, Spain’s IBEX 35 Index descended 0.9% and Greece’s ASE Athens Index fell 3.7%, while Switzerland’s Swiss Market Index is rose 1.3%.

Stocks in Asia finished mostly higher, aided by the relative resiliency in the markets yesterday in the face of the weekend’s Greek elections. The reaction suggested expectations that the impact of the elections would be contained. Meanwhile, economic reports in the region were limited, with a report showing China’s industrial profits fell solidly y/y in December.

Market Insights 1/26/2015

Greek Election Stirs Pot of Uncertainty

U.S. equities began the week with only modest gains, as investors paused to gauge the consequences of the weekend’s Greek elections that resulted in a victory for an anti-austerity party.

Wednesday’s forthcoming Fed monetary policy decision may have added some additional caution to the mix, but with the European markets seemingly shrugging off the election results and the euro rebounding from an 11-year low versus the U.S. dollar, the implications appear that the impact of such could be contained, mitigating some of the pressure on equities.

Treasuries finished lower amid a light economic calendar that showed a surprising contraction in regional manufacturing activity, as did gold and crude oil prices, while the U.S. dollar was slightly higher.

The Markets…

The Dow Jones Industrial Average inched 6 points (.04%) higher to 17,679

The S&P 500 Index added 5 points (0.26%) to 2,057, sectors leading the way higher included Energy (+1.43%) HealthCare (+.52%) and Consumer Discretionary (+.52%) while technology (-.41%) and Utilities (-.06%) finished the day lower.

Small and MidCaps outpaced LargeCaps with the Small Cap 600 better by .93% and the SmallCap 400 higher by 1.11%

The Nasdaq Composite gained 14 points (0.29%) to 4,772

In moderate volume, 791 million shares were traded on the NYSE, and 1.7 billion shares changed hands on the Nasdaq

WTI crude oil lost $0.44 to $45.15 per barrel, wholesale gasoline lost $0.02 to $1.35 per gallon

The Bloomberg gold spot price moved $14.47 lower (.90%) to $1,279.61 per ounce

Regional manufacturing activity unexpectedly contracts

The Dallas Fed Manufacturing Index showed growth in activity for the region surprisingly fell into contraction territory, dropping to -4.4 for January—the first negative reading since May 2013—from December’s 3.5 level, and compared to the 3.2 figure that was forecasted by economists surveyed by Bloomberg. A reading below zero denotes contraction. The report showed new orders dropped to -7.7 from 2.7, and the contraction in orders growth rate accelerated.

Today’s report will kick off the week’s heavy economic front, headlined by Wednesday’s Federal Reserve Federal Open Market Committee (FOMC) monetary policy decision. The decision will not be accompanied by updated economic projections or a press conference from Fed Chairwoman Janet Yellen. The Fed is in focus in 2015 with many expecting a hike in rates this year. Lower energy prices, a stronger dollar, and weak global growth all have the potential to disrupt those plans, although at this stage we still believe a hike will occur sometime in the second half of the year. But with a more dovish voting block and the aforementioned risks, it doesn’t seem like the “slam dunk” it might have just a couple of months ago. In fact, many experts are pushing their first increase projections out to early 2016.

Treasuries finished lower, with yields slightly higher, as the yields on the 2-year and 10-year notes, as well as the 30-year bond rose 2 basis points to 0.51%, 1.82%, and 2.40%, respectively.

We continue to remain optimistic on equities for 2015. even if the total return of the S&P 500 is half or what it was in 2014 it far outpaces cash and bonds. We believe the economy will continue to grow and maybe even surprise economists to the upside. We believe this is a “plow horse economy and not a race horse economy” and continue to like sectors that are less economically sensitive like Utilities, Healthcare and Consumer Staples, along with certain choice REIT’s and Preferred Stock. We also believe global investors will seek the relative safety of large US blue chips (another tick in the plus column for the S&P 500) along with US treasuries. This puts us squarely in the camp that rates will stay low for the foreseeable future.

In the meantime, the first key piece of data will be tomorrow’s release of December durable goods orders, projected to rise 0.4% month-over-month after dropping 0.7% in November. Excluding transportation, orders are anticipated to increase 0.6% following the 0.4% decline in the month prior, while non-defense capital goods orders excluding aircraft, a proxy for business spending, are expected to grow 0.9% after being flat in November.

In addition to the durable goods order report, tomorrow’s domestic docket will also include: the S&P/Case-Shiller Home Price Index, forecasted to show prices within the 20-city composite declined 0.2% year-over-year and rose 0.6% m/m on a seasonally-adjusted basis for November, compared to the respective 0.1% decrease and 0.8% gain seen in the prior month; Markit’s preliminary Services PMI Index, with economists expecting a reading of 53.8 for January, with a level above 50 representing expansion; new home sales, forecasted to rose in December to annual rate of 452,000 units, compared to the 438,000 posted in November; Consumer Confidence, with the Street anticipating a level of 96.0 for January, up from the 92.6 registered in December; and the Richmond Fed Manufacturing Index, expected to fall to a reading of 5.5 in January from the 7.0 posted in December, with a reading above zero indicating expansion in the Mid-Atlantic region.

Europe shows some relative resiliency in face of Greek election results

The European equity markets traded mostly to the upside, showing some resiliency in the face of results from a general election in Greece that showed the anti-austerity party Syriza won. Stocks shrugged off the result, which is causing some uncertainty regarding the composition of the European Union and whether Greece will renegotiate the terms of its bailout agreement. Although the Syriza party did not win an outright majority, it formed an alliance with the Independent Greeks party, which is also an anti-austerity party.

The euro traded higher versus the U.S. dollar, rebounding from an 11-year low despite the results, while Greek stocks moved solidly to the downside. The impact of the election on the markets could have been overshadowed by last week’s announcement from the European Central Bank (ECB) to expand its stimulus measures to include the purchases of government bonds.

Greece’s ASE Athens Index dropped 3.2%, while the U.K. FTSE 100 Index was up 0.3%, Germany’s DAX Index advanced 1.4%, France’s CAC-40 Index increased 0.7%, Switzerland’s Swiss Market Index moved 1.7% to the upside, Spain’s IBEX 35 Index gained 1.1%, and Italy’s FTSE MIB Index ascended 1.2%.

Stocks in Asia finished mixed on the heels of this weekend’s national election in Greece, which fostered some uncertainty regarding the composition of the European Union. Japanese equities declined, but finished off of the worst levels of the day, as the yen weakened somewhat and a report showed the nation’s exports rose more than expected in December.

However, stocks in China advanced, with technology issues helping extend a recent rally that has taken the Shanghai Composite to a five-year high, amid speculation that the sector will benefit from increased government spending on national defense, per Bloomberg. Finally, volume was lighter than usual as markets in Australia and India were closed for holidays.

Tomorrow’s international economic calendar will be very light, with only 4Q GDP from the U.K. expected on the docket.

Greek Election: Leftist Leader Claims Victory Over Austerity

Greek leftist leader Alexis Tsipras promised on Sunday that five years of austerity, “humiliation and suffering” imposed by international creditors were over after his Syriza party swept to victory in a snap election on Sunday.

With about 60 percent of votes counted, Syriza was set to win 149 seats in the 300 seat parliament, with 36.1 percent of the vote, around eight points ahead of the conservative New Democracy party of Prime Minister Antonis Samaras.

The 40-year-old Tsipras is on course to become prime minister of the first euro zone government openly opposed to the kind of crippling austerity policies which the European Union and International Monetary Fund imposed on Greece as a condition of its bailout.

“Greece leaves behinds catastrophic austerity, it leaves behind fear and authoritarianism, it leaves behind five years of humiliation and anguish,” Tsipras told thousands of cheering supporters gathered in Athens.

European leaders have said Greece must respect the terms of its 240 billion euro bailout deal, but Tsipras campaigned on a promise to renegotiate the country’s huge debt, raising the possibility of a major conflict with euro zone partners.

Tsipras said on Sunday he would cooperate with fellow euro zone leaders for “a fair and mutually beneficial solution” but said the Greek people came first. “Our priority from the very first day will be to deal with the big wounds left by the crisis,” he said. “Our foremost priority is that our country and our people regain their lost dignity.”

Tsipras’s campaign slogan “Hope is coming!” resonated with voters worn down by huge budget cuts and heavy tax rises during six years of crisis that has sent unemployment over 25 percent and pushed millions into poverty.

With Greece’s economy unlikely to recover for years, he faces enormous problems and his victory raises the prospect of tough negotiations with European partners including German Chancellor Angela Merkel.

As thousands of flag-waving supporters hit the streets of Athens, some shedding tears of joy, Germany’s Bundesbank warned Greece it needed reform to tackle its economic problems and the euro fell nearly half a U.S. cent. Tsipras has promised to keep Greece in the euro and has toned down some of his rhetoric but his arrival in power would mark the biggest challenge to the approach adopted to the crisis by euro zone governments.

With Greece’s bailout deal with the euro zone due to end on Feb. 28, Tsipras’ immediate challenge will be to settle doubts over the next instalment of more than 7 billion euros in international aid. EU finance ministers are due to discuss the issue in Brussels on Monday.

Financial markets have been worried a Syriza victory will trigger a new financial crisis in Greece, but the repercussions for the euro zone are expected to be far smaller than feared the last time Greeks went to the polls in 2012.

If Syriza ends up short of an absolute majority, Tsipras will have to try to form a coalition with smaller parties or reach an agreement that would allow it to form a minority government with ad-hoc support from others in parliament.

Negotiations are likely to begin immediately and both Panos Kammenos, the leader of the small Independent Greeks party and Stavros Theodorakis, head of the centrist To Potami party, said they would be willing to support an anti-bailout government.

If Syriza requires support to govern, it may find itself hostage to its partners’ demands, raising questions over how durable a Tsipras government would prove.

Market Insights 1/23/2015

ECB-Fueled Rally Takes a Breather

U.S. equities finished the week mixed, with the Dow and S&P 500 tumbling late to end at the lows of the day, snapping a four-session winning streak that came courtesy of yesterday’s rally after the European Central Bank (ECB) announced expanded stimulus measures.

The U.S. economic calendar was also a mixed bag, as existing home sales and the Leading Index rose, and manufacturing activity unexpectedly decelerated. Treasuries finished higher, as did the U.S. dollar, while gold was lower and crude oil prices were mixed.

On the equity front, earnings continued in earnest, as Dow member General Electric posted mixed results, Dow component McDonald’s fell short of revenue expectations but topped same-store sales forecasts, Starbucks matched projections and upped the low end of its earnings guidance, and UPS issued a warning about 4Q and full-year earnings.

The Markets…

The Dow Jones Industrial Average fell 141 points (0.8%) to 17,673

The S&P 500 Index declined 11 points (0.6%) to 2,052, 3 of the 10 S&P 500 sectors finished the day in the green with Utilities +.51%, Energy +.14% and Technology +.12% the winners while Materials -1.14% and Consumer Staples -.86% provided most of the drag.

For the week all 10 S & P 500 sectors finished higher with energy +5.97%, Materials +4.06% and Industrails +3.84% the leaders and Utilities bringing up the rear with a +1.68% gain over the past 5 trading days.

Small and MidCaps fared slightly better with the MidCap 400 down .44% and the SmallCap 600 off by .30%

The Nasdaq Composite inched 7 points (0.2%) higher to 4,758

In moderate volume, 776 million shares were traded on the NYSE, and 1.7 billion shares changed hands on the Nasdaq

WTI crude oil lost $0.72 to $45.59 per barrel, wholesale gasoline gained $0.01 to $1.37 per gallon

The Bloomberg gold spot price moved $8.89 lower to $1,293.36 per ounce

Markets were higher on the week, as the DJIA gained 0.9%, the S&P 500 Index rose 1.6% and the Nasdaq Composite Index increased 2.7%

Existing home sales grow, while the Leading Index rises slightly more than expected

Existing-home sales in December came in roughly inline with expectations, rising 2.4% month-over-month to a 5.04 million annual rate compared to the Bloomberg forecast of a rise to a 5.08 million pace. Existing home sales climbed above the 5 million mark for the sixth time in seven months and are above y/y levels for the third-straight month. November’s figure was adjusted modestly downward to a 4.92 million unit pace. The median existing-home price was up 6.0% from a year ago to $209,500. Single-family home sales rose 3.5% m/m, and are now 4.0% higher y/y, while multi-family sales were down 5.0% m/m, and were unchanged compared to the same period a year ago. The supply of homes available for sale dropped 11.1% compared to last month to 1.85 million units, equating to 4.4 months of supply at the current sales pace, and was 0.5% lower y/y.

Lawrence Yun, Chief Economist for the National Association of Realtors (NAR), said, “sales picked up in December to close a 2014 that got off to a sluggish start but showed encouraging signs of activity the second half of the year. Home sales improved over the summer once inventory increased, prices moderated and economic growth accelerated.”

Today’s report culminates a week of upbeat data on the housing front as it was preceded by solid growth in single-family housing construction and a third-consecutive weekly jump in mortgage applications. The positive outlook for the U.S. economy, led by a steadily growing labor market, is helping boost housing activity, bolstered by the recent drop in interest rates. We believe the Fed will extend the time frame for rate hikes while lowering the expectation for the eventual peak in the Fed funds rate. That is actually what the market has priced in already: a slower and lower rate cycle. We anticipate 2015 will be a volatile year in the fixed income markets and suggest focusing bond portfolios on higher-credit-quality bonds, such as Treasuries and investment-grade corporate and municipal bonds with intermediate-term durations of five to 10 years. Riskier sectors of the market, such as high-yield and emerging-market bonds, are likely to experience significant volatility in the months ahead in our opinion.

The Conference Board’s Index of Leading Economic Indicators (LEI) increased 0.5% m/m in December, above the projected 0.4% growth, while November’s 0.6% gain was revised to a 0.4% rise. The report showed positive contributions from components pertaining to the yield curve, credit and jobless claims, while building permits weighed on the index.

The preliminary Markit U.S. Manufacturing PMI Index for January unexpectedly declined to 53.7 from December’s 53.9 level, and compared to the increase to 54.0 that economists had expected, with a reading above 50 denoting expansion. Markit said the strong increase in manufacturing production volumes was maintained at the start of 2015, while new business growth hit a one-year low and input prices declined for the first time in two-and-a-half years. The release is independent and differs from the Institute for Supply Management’s (ISM) Manufacturing Index, as it has less historic value and Markit weights its index components differently.

Treasuries ended higher, as the yield on the 2-year note declined 2 basis points to 0.50%, while the yields on the 10-year note and the 30-year bond dropped 6 bps to 1.80% and 2.38%, respectively.

Europe extends gains from ECB stimulus announcement

The European equity markets traded higher, extending yesterday’s gains that came from the announcement by the European Central Bank (ECB) that it will begin to purchase government bonds, with the expanded stimulus measures aimed at boosting inflation and arresting stagnation for the eurozone economy. The euro weakened further in today’s trading, hitting a more than 11-year low versus the U.S. dollar. Plus, an upbeat read on Eurozone business activity helped boost sentiment. Markit’s preliminary Eurozone Composite PMI Index—a gauge of activity out of both the services and manufacturing sectors—improved to 52.2 for January, from 51.4 in December, and compared to the 51.7 level that economists had projected. A reading above 50 denotes expansion. In other economic news, U.K. retail sales unexpectedly rose in December, while manufacturing and business confidence in France held steady for January. In equity news, Telefonica SA (TEF $15) traded higher as Hong Kong’s Hutchison Whampoa Ltd. (HUWHY $26) began talks to acquire the company’s U.K. wireless unit O2 for as much as $15 billion.

The U.K. FTSE 100 Index was up 0.5%, Germany’s DAX Index gained 2.1%, France’s CAC-40 Index increased 1.9%, Spain’s IBEX 35 Index traded 0.7% higher, Switzerland’s Swiss Market Index ascended 2.0%, and Italy’s FTSE MIB Index moved 0.2% to the upside.

Stocks in Asia finished the week with widespread gains on the heels of yesterday’s announcement from the European Central Bank (ECB) to expand its asset purchases to include government bonds, while a relatively upbeat read on Chinese manufacturing activity also aided sentiment. The HSBC preliminary China Manufacturing PMI Index unexpectedly rose to 49.8 in January, from 49.6 in December, and compared to the decline to 49.5 that economists had projected. However, this would be the second-straight month in contraction territory as denoted by a reading below 50. Stocks in Japan advanced, with the data and ECB stimulus optimism helping overshadow some strength in the yen, along with a positive read on Japanese January manufacturing activity. Elsewhere, South Korea’s 4Q GDP growth decelerated to a 0.4% quarter-over-quarter rate, after expanding by 0.9% in 3Q. The 4Q figure resulted in a 2.7% y/y increase in output, versus the 2.8% expansion that was expected, and compared to the 3.2% rise that was seen in the previous quarter.

NEXT WEEK: Fed Focus

Next week, the U.S. economic calendar is poised to be dominated by Wednesday’s Federal Reserve Federal Open Market Committee (FOMC) monetary policy decision. The decision will not be accompanied by updated economic projections or a press conference from Fed Chairwoman Janet Yellen. The Fed is in focus in 2015 with many expecting a hike in rates this year. Lower energy prices, a stronger dollar, and weak global growth all have the potential to disrupt those plans, although at this stage we still believe a hike will occur sometime in the second half of the year. But with a more dovish voting block and the aforementioned risks, it doesn’t seem like the slam dunk it might have just a couple of months ago.

Other releases on next week’s economic docket include: regional manufacturing reports out of Chicago, Dallas and Richmond, durable goods orders, the S&P/CaseShiller Home Price Index, Markit’s preliminary Services PMI Index, new home sales, Consumer Confidence, weekly mortgage applications and jobless claims, pending home sales, the 4Q Employment Cost Index, the first (of three) read on 4Q GDP, and the final University of Michigan Consumer Sentiment Index.

Finally, along with the highly anticipated Greek elections over the weekend, the international calendar will deliver: Germany’s retail sales, IFO Business Climate Index, Consumer Confidence and inflation figures, eurozone inflation data, 4Q U.K. GDP, Japan’s industrial production, retail sales and inflation statistics, China’s industrial profits, and Canada’s monthly GDP.

Market Insights 1/22/2015

Stocks Soar with ECB Bond Buying Boost on Horizon

The U.S. equity markets staged a thunderous surge in the final hour of trading as stocks doubled down on hard fought gains that arose during a storm of early trading on the heels of the European Central Bank’s (ECB) decision to expand its current stimulus program to include sovereign debt purchases.

Treasuries finished mixed following the announced expansion of the ECB’s asset purchase program, while the U.S. economic calendar showed jobless claims came in higher than anticipated and Midwest manufacturing activity surprisingly decelerated. The U.S. dollar rallied and gold was higher, while crude oil prices were mixed.

The Markets…

The Dow Jones Industrial Average surged 260 points (1.5%) to 17,814

The S&P 500 Index gained 31 points (1.53%) to 2,063 with 9 of the 10 S&P 500 sectors finishing in the green with Financials +2.47, Consumer Discretionary +1.88% and Technology +1.64%. Utilities were the only sector to give back ground losing -.43%,

Small and MidCaps outperformed LargeCaps with the MidCap 400 gained 1.85% and the SmallCap 600 rallied by 2.11%

The Nasdaq Composite advanced 83 points (1.8%) to 4,750

In moderate volume, 890 million shares were traded on the NYSE, and 2.0 billion shares changed hands on the Nasdaq

WTI crude oil decreased $1.47 to $46.31 per barrel, wholesale gasoline was unchanged at $1.33 per gallon

The Bloomberg gold spot price advanced $8.95 to $1,302.04 per ounce

Jobless claims decline less than expected

Weekly initial jobless claims declined by 10,000 to 307,000 last week, above the 300,000 level that economists surveyed by Bloomberg had expected, as the prior week’s figure was upwardly revised by 1,000 to 317,000. However, the four-week moving average, considered a smoother look at the trend in claims, rose by 6,500 to 306,500, while continuing claims increased by 15,000 to 2,443,000, north of the forecast of economists, which called for a level of 2,400,000.

The Kansas City Fed Manufacturing Activity Index showed growth in the Midwest region surprisingly decelerated in January, declining to 3 from 8 in December, where economists had expected it to remain, with a reading above zero depicting expansion.

Treasuries were mixed, with the yields on the 2-year and 10-year notes advancing 1 basis point bp to 0.52% and1.88%, respectively, while the 30-year bond rate ticked 1 bp lower to 2.45%.

Tomorrow, the domestic economic calendar will culminate with the release of existing home sales, with the largest portion of the housing market expected to rise 3.0% month-over-month to an annualized rate of 5.08 million units in December. This week, housing data has fostered optimism that the market could be set to regain its momentum with single-family home construction activity rising solidly and mortgage applications jumping for the third-straight week, as mortgage rates continued to drop. The recent soft spot in the housing recovery is one of a few factors counterbalancing the positives going for the consumer.

Other reports on Friday’s economic calendar include: Markit’s preliminary U.S. Manufacturing PMI Index for January, as well as the Index of Leading Economic Indicators.

Europe higher following European Central Bank announcement

The European equity markets gained ground following the decision by the European Central Bank (ECB) to leave its benchmark interest rate unchanged at a record low of 0.05%, while keeping its deposit rate at -0.2%, as expected. However, the main event of the ECB’s decision was the customary press conference following the decision by ECB President Mario Draghi, in which he announced that beginning in March, it will expand its asset purchase program to include public debt—investment grade sovereign bonds—aimed at trying to arrest stagnant economic growth and boost inflation in the region.

The combined monthly purchases of its already existing private sector securities program and the government bonds will be 60 billion euros lasting until September 2016. But the end date could be adjusted until it sees a sustained adjustment in the path of inflation, which is aimed at a target of below but close to 2.0%. Debt of each country will be purchased based on their share of ECB capital and purchases will be carried out by the central bank of each of the 19 countries, with national central banks being responsible for 80% of losses on assets they purchase.

The euro reversed early gains and traded solidly lower against the U.S. dollar. In other economic news, Eurozone consumer confidence improved by a smaller amount than anticipated for January.

The U.K. FTSE 100 Index was up 1.0%, Germany’s DAX Index gained 1.3%, France’s CAC-40 Index increased 1.5%, Italy’s FTSE MIB Index rose 2.4%, and Spain’s IBEX 35 Index traded 1.7% higher, while Switzerland’s Swiss Market Index dipped 0.1%.

Stocks in Asia finished mostly higher in choppy action ahead of today’s monetary policy decision and announcement of massively expanded stimulus from the European Central Bank. Japanese equities advanced with some modest weakness in the yen supporting the markets and Chinese stocks moved higher with the nation’s Premier Li noting that the government will ensure an “appropriate” pace of growth and will avoid a hard landing, per Bloomberg. Additionally, the People’s Bank of China conducted operations to add money to the financial system ahead of the Chinese new year holiday next month.

Tomorrow, the international economic docket will offer Markit preliminary Manufacturing PMI reports for Germany, France and the eurozone, retail sales from the U.K. and the CPI from Canada, while HSBC’s Flash Manufacturing PMI for China is also expected to be released.

Open-ended European QE Starts

European Central Bank (ECB) President Mario Draghi announced the launch of an open-ended, expanded monthly 60 billion euro ($70 billion) private and public bond-buying program on Thursday.

The long-anticipated introduction of euro zone government bond purchases, which could amount to as much as a trillion euros, will mean the ECB will join the U.S. Federal Reserve, Bank of England and Bank of Japan in launching a quantitative easing (QE) scheme.

The program will be open-ended, lasting until at least 2016, Draghi told reporters at his regular media conference on Thursday, and will start in March this year. The hope is that it will boost the region’s painfully low inflation rate, which came in at an annual minus 0.2 percent in December.

Explaining the ECB’s decision, Draghi said: “Inflation dynamics have continued to be weaker than expected. While the sharp fall in oil prices over recent months remains the dominant factor driving current headline inflation, the potential for second-round effects on wage and price-setting has increased and could adversely affect medium-term price developments.”

The size of the program was bigger than the 50 billion euro per month rumored prior to Draghi’s announcement.

European QE is set to start with a bang rather a whimper, a fact that will be well received by investors in our opinion. The euro zone was in need of shock-and-awe tactics from the ECB to combat the prospect of a prolonged period of deflation, and Draghi has finally delivered on his promise to do “whatever it takes” over a year ago.

The ECB will purchase euro-denominated investment-grade securities only. The debt of countries like Greece, which are subject to international bailout programs, will be subject to “additional eligibility criteria,” Draghi said. Debt that is trading with a negative yield will also be eligible for the program. Draghi also said that in the event of a sovereign restructuring or default, public and private bondholders would be treated on equal terms.

Twenty percent of the additional purchases will be subject to risk-sharing arrangements, designed to limit the amount of risk the ECB takes on to its balance books. The majority of risk will remain with euro zone national central banks. No more than 25 percent of each debt issue will be purchased. The maturities of the debt purchases will range between two and 30 years.

The euro slid against both the sterling and the U.S. dollar after Draghi’s announcement. Europe’s stock markets staged a small rally on the news of the announcement, while 10-year yields on a range of European sovereign debt fell to record lows.

Earlier in the day, the ECB announced it would hold its main interest rate unchanged. It kept its main refinancing rate at 0.05 percent, with the rate on its marginal lending facility at 0.30 percent. The rate on its deposit facility was held at -0.20 percent.

Meanwhile Denmark, whose currency is pegged to the euro, was forced to issue its second rate cut in a week in a bid to defend the krone. The Danish central bank trimmed its deposit rate from minus 0.2 percent to minus 0.35 percent.

Market Insights 1/21/2015

Domestic Stocks Gain on Hopes of ECB Stimulus Reign

Despite another round of turbulence and trading, the U.S. equity markets closed the day’s session in positive ground as stocks were able to capture some of the gains that arose following early reports that the European Central Bank may be weighing a massive stimulus effort for the Eurozone economy.

Treasuries were lower as the domestic economic calendar showed some divergent data in housing construction, while mortgage applications jumped for the third-straight week. Gold and the U.S. dollar were lower, while crude oil prices were higher.

In earnings news, Dow member IBM issued a disappointing outlook, while fellow Dow component UnitedHealth Group bested analysts’ quarterly estimates and Netflix posted earnings results well above forecasts.

The Markets…

The Dow Jones Industrial Average added 39 points to 17,554

The S&P 500 Index gained 10 points (0.5%) to 2,032, all 10 S&P 500 sectors ended the day higher with Energy leading the way +2.03%, Utilities .96% and Materials .98% while Technology .17%, HealthCare .20% and Financials .26% saw the smallest increase.

Small and MidCaps ended the day with mixed results as the MidCap 400 rallied by .61% ( 8.7 pts) while the SmallCap 600 gave back .26% (1.8 pts )

The Nasdaq Composite advanced 13 points (0.3%) to 4,667

In moderate volume, 771 million shares were traded on the NYSE, and 1.8 billion shares changed hands on the Nasdaq

WTI crude oil increased $1.31 to $47.78 per barrel, wholesale gasoline gained $0.02 to $1.33 per gallon

The Bloomberg gold spot price declined $1.58 to $1,293.74 per ounce

Housing construction mixed, while mortgage applications jump again

Housing starts for December came in above forecasts, rising 4.4% month-over-month to an annual pace of 1,089,000 units, compared to the 1,040,000 unit rate that economists surveyed by Bloomberg had called for. Also, November’s starts were upwardly revised to an annual pace of 1,043,000, from the 1,028,000 rate initially reported. The upbeat starts data came as single-family construction was 7.2% higher m/m, more than offsetting a 4.2% decline in multi-family starts. Meanwhile, building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, came in south of expectations, declining 1.9% m/m in December to an annual rate of 1,032,000, after November’s upward revision to a 1,052,000 rate—from a pace of 1,035,000 units that was originally reported. Economists had expected permits for December to come in at an annual pace of 1,060,000 units. However, permits for single-family units grew by 4.5% m/m, while multi-family permits fell 12.4%.

Today’s housing data followed yesterday’s home builder sentiment report from the National Association of Home Builders (NAHB), which reflected the “gradual improvement that is occurring in many markets throughout the nation.” The solid gains in housing construction activity for single-family homes were encouraging as they make up the bulk of the market, while the recent drop in mortgage rates has sparked a ramp up in home lending activity. The housing market improvement has stalled recently and the contribution to economic growth from the sector has declined since the housing collapse. If the housing market can regain some of its lost momentum the consumer could find further support to go along with the drop in energy costs, adding credence to our outlook that with solid U.S. economic growth we believe U.S. stocks still have room to move on the upside.

Treasuries were lower, with yields marginally higher as the yield on the 2-year note adding 1 bp to 0.58%, the yield on the 10-year note rising 7 bps to 1.85% and the 30-year bond rate gaining 6 bps to 2.44%.

In other North American economic news, the Bank of Canada unexpectedly lowered the target for its benchmark overnight interest rate by 25 bps to 0.75%, as inflation is projected to be temporarily below its target due to weaker energy prices, which are anticipated to be negative for Canadian growth.

Europe turns higher on ECB bond purchase proposal reports

The European equity markets finished mostly higher, ahead of tomorrow’s monetary policy decision by the European Central Bank (ECB), with expectations running high that the central bank will unveil expanded asset purchases to include sovereign debt. Stocks in the region overcame early sluggishness and moved higher following a Wall Street Journal report, suggesting a proposal from the ECB’s executive board calls for bond purchases of roughly 50 billion euros per month, lasting for a minimum of one year, per people familiar with the matter. An ECB spokesperson declined to comment.

The euro traded higher versus the U.S dollar in choppy trading after paring gains on the report. Those high expectations for the ECB could end in disappointment for European stock investors if the bank takes a more moderate course or fails to give sufficient details at the January 22 policy meeting. Disappointment could also cause the euro to rise relative to the U.S. dollar. Conversely, if the ECB follows through with large-scale purchases, European stocks could get a short-term boost, and the euro could fall versus the dollar.

Swiss stocks saw heavy pressure after recovering the past couple sessions from last week’s sharp sell-off that ensued after the Swiss National Bank abandoned its currency peg against the euro, ahead of the ECB monetary policy decision. Meanwhile, the Bank of England released the minutes from its policy meeting earlier this month, in which it left its benchmark interest rate at a record low of 0.50%. The BoE’s minutes showed policymakers were unanimous in their decision to keep interest rates unchanged, with the two that voted for an increase in the previous meetings saying a rate hike could apply further downside pressure on inflation, which is already below the BoE’s target. In other economic news, U.K. jobless claims fell more than expected in December, and the nation’s unemployment rate dropped more than expected to 5.8%.

The U.K. FTSE 100 Index and Italy’s FTSE MIB Index were up 1.6%, Germany’s DAX Index gained 0.4%, France’s CAC-40 Index increased 0.9%, and Spain’s IBEX 35 Index advanced 0.5%, while Switzerland’s Swiss Market Index fell 2.1%.

Stocks in Asia finished mostly higher following yesterday’s resiliency in the U.S. and the gains in Europe yesterday, with sentiment being buoyed by continued expectations that the European Central Bank will unveil further stimulus measures following its meeting tomorrow. Chinese equities rallied, led by financials which rebounded from the sharp losses seen to begin the week as regulators tightened margin lending standards.

Stocks in Hong Kong advanced, with sentiment also being supported from yesterday’s slightly stronger-than-expected 4Q GDP growth. In Australia, resource-related stocks paced an advance on the heels of the recent rally in gold prices, while a report showing the country’s consumer confidence improved underpinned the positive mood. However, Japanese equities bucked the regional trend, with the yen strengthening to weigh on export-related stocks in the wake of the Bank of Japan’s monetary policy decision, where it maintained its highly-accommodating stance and cut its core consumer price inflation forecasts.

The international economic docket for tomorrow will be light, offering reads on industrial orders and retail sales from Italy, while in central bank action, we will receive the aforementioned ECB monetary policy decision and the Bank of Japan is expected to release its monthly economic report for January.