Risk assets soared for the week with US equities no exception closing up 2.2% at 1438 as ECB’s “silver bullet” President Mario Draghi announced on Thursday that they would conduct Outright monetary transactions (OMT). This gave a kick to all things risk and meant peripheral European bond yields fell. NASDAQ was up 1.9% to 2825. With total Put/Call ratio of 0.686 suggests options markets are very bullish. Volatility has been crushed on the CBOE VIX picked which fell 17.7% to 14.38 on the news. The DJIA was up 1.7% at 13,307.
Dollar Index continues to sink on the news of new initiatives from the ECB and and next week’s prospects of another round of QE from the Fed which lead it to fall again for the third week down 1.2% to 80.234. Eyes now turn to the Fed at its September 13 meeting. EUR/USD rallied 0.4% to 1.2632 as the markets were took a bid from the ECB decision to conduct OMT. Elsewhere, AUD was up 0.6% for the week to 1.0383. JPY was down 0.24% to 78.180, and the GBP was stronger by 1% to 1.6024. With European bond yields crashing on the news of the OMT from the ECB – Italian 10 years trading back down to the 5.03% from previously being around the 5.847% at the end of August and also Spanish 10 year yield are down from the August closing highs of 6.86% to 6.03% on Friday’s close.
Crude Inventories this week continues to see massive draws with 7.4m barrels vs -4.9m barrels forecasts Brent fell 0.3% on the week to 114.60 as markets look to be pricing in central back actions several weeks back. The question that opens is are the markets set up for reverses once all QE is announced? WTI was fell 0.3% to 96.29. RBOB unleaded gasoline futures closed up 2% at 3.0323. Natural Gas fell 3% at 2.69. Heating Oil finished down 0.7% to 3.16 on the week. Gold continues to push higher up 2.7% at USD$1737.60 /oz in New York as markets continued to run on QE fumes! Copper rallies 5.2% on stimulus fever to close week at
US Financials +3.6% Rallied on the stimulus plans of the central banks BAC +11.4% and JPM +6.5%
Newmont Mining +2% as the largest U.S. gold producer rallied as gold rose to a six-month highs
Amazon + 4.4% on the news of introducing a new line of Kindle e-readers and tablets
Facebook +5% on news that founder and CEO will not start selling his holdings for atleast a year
Freeport McMoRan Copper +9.2% as copper markets rallied 5.2% buoyed by the stimulus plans of ECB and possible QE 3 from the Fed