Equities Investors Hear Music To Their Ears Drifting In From Europe Courtesy Of The ECB’s Mario Draghi

Head of the European Central Bank, Mario Draghi, made dovish comments about the ECB’s position regarding quantitative easing and rates.

Mr. Draghi added that a thorough analysis of factors that have impeded the return of inflation to “levels below, but close to, 2% in the medium term” are necessary. “In this context, the degree of monetary policy accommodation will need to be re-examined at our December monetary policy meeting, when the new eurosystem staff macroeconomic projection will be available,” he said.

Draghi also stated that the current asset purchase program — €60 billion ($68 billion) a month, which started in March and is scheduled to run through the end of September, 2016 — has “sufficient flexibility in terms of adjusting its size, composition and duration.”

Draghi reconfirmed that the program could run beyond next September if a sustained inflation to close to 2% is not achieved.

“The ECB was extremely dovish,” said Richard Benson, managing director, co-head of portfolio investments at Millennium Global Investments, in an email. “They all but forward announced an easing in December.”

The DAX and CAC ended up 2.5% and 2.25% respectively on the news. As was predictable, the euro deflated a bit and drove the U. S. dollar up.

The ECB stance makes it all but certain that the Federal Reserve will have to hold off on an interest rate hike for some time. The Fed can’t risk the dollar-euro spread wobbling too much. The U.S. needs a weaker greenback to goose up exports. It seems the two huge economic blocks are trying to find some sort of workable equilibrium between the two top currencies.

This week’s jobless claims came in at 259,000, below the expected 265,000. Additionally, the September Chicago Fed national activity index came in at -0.37, slightly better than the -0.39 August reading.

The FHFA House Price index rose 0.3% in August.

Other economic data points included September existing home sales, which rose 4.7% to 5.55 million.

The data is good, but overall the leading indicators fell two tenths of a percent.

An interesting feature of this earnings season is that the equities markets seem to be taking in stride the consistent misses on revenues that major stocks are recording. That seems to indicate that investors are viewing the revenue issue as a temporal problem and/or the correction we’ve experienced since August is simply over and people are again willing to risk money.

The Dow was up almost 1.9%, while both the S&P 500 and NASDAQ were up about 1.65%.

Gold suffered greatly from the rising dollar, although regular trading was so strong it managed to stabilize the price of the yellow precious metal. Consequently, gold is down a mere 80 cents at mid afternoon.

The other precious metals experienced even more dramatic support in regular trading and so went firmly into positive territory with palladium strengthening most – over 1.00%.

Oil is a mess at the moment, despite a rally in gasoline prices. The fundamentals are simply moving against crude. There is simply too much oil on the market with a promise of more to come.

A meeting of oil exporters from OPEC as well as non-member producers ended Wednesday without tangible price support measures despite discussion of the risk low oil prices would have on investment in new supplies.

"There are no signs of any sort of production cuts, which would have to start from within OPEC," said John Mac, trader in crude oil spreads at Tyche Capital Advisors in Laurel Hollow, New York.

However, oil price has been known to turn on a dime. You can lay that at the feet of the kinds of countries (mostly) that produce oil – mostly underdeveloped and politically unstable or authoritarian. And, like it or not, the Middle East is going to be politically and militarily unpredictable for some time to come.

Wishing you as always, good trading,