AM Analysis
Bank of Japan maintains its asset purchasing program
Asian stocks traded higher overnight after the Bank of Japan maintained its asset purchasing program. The Bank of Japan boosted lending programs while sticking with its plan to maintain purchases as the central bank tries to support a recovery and tackle the regions high deflation. Chinese shares remained under pressure after it was announced the central bank drained funds from the banking system after new lending reached a record level.
FTSE futures are indicating a 10 point higher open following a positive session in Asia overnight and as investors focus on the latest UK inflation figures. UK inflation is set to dip below the Bank of England’s 2% target for the first time in more than four years after retailers cut prices and the price of crude eased.
The euro was little changed overnight after being supported by prospects for a new reforming government in Italy and better euro-zone growth. The euro could be affected later today as investors eye the important February ZEW survey out of German at 10:00.
– Lee Mumford
PM Analysis
A volatile morning for UK markets
A volatile morning for UK markets as inflation dropped below the target 2% level for the first time since 2008 coming in at 1.9%. This will have further strengthened the BOE’s case that interest rates should remain at current levels for the time being and has sent speculators into frenzy.
Investors are positioning themselves for the increasing possibility of a European version of QE in response to the growing threat of deflation. Following in the footsteps of the US, BOE and Japan the new go-to policy for growth has investors questioning the consequences for the bond market. The fear is that improvements in Euro bond markets would be undone should QE be resorted to and could further destabilise the single currency, which Mario Draghi vowed to save.
– Alex Conroy
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