The European Central Bank Grabs The Markets’ Reins

Another risk-off day swirled in markets around the world today, extending yesterday’s momentum and touching all investments in some way.

Crude oil was down, but not spectacularly so, leading us to surmise that equities are fearful of another oil meltdown, and so slipped in price.

West Texas Intermediate was down a little more than half a percentage point, whereas Brent North Sea was considerably weaker, off 1.75%. Both types of crudes suffered from concerns about growing stockpiles and the very shaky prospect of the OPEC-led production freeze.

Iran is now loudly balking over the prospect of a freeze. Call us crazy, but on a broader front we have a sense that the Obama administration is pivoting toward Iran as it wearies of the Saudi waffling on Middle East issues.

The only index that showed any kind of strength today was the Nikkei. Shanghai tumbled 2.00% but Hong Kong held on for a very small loss.

For whatever softheaded reasons, after first having been elated over the European Central Bank’s cornucopia of monetary easing, the markets turned against the ECB and tumbled. The DAX was down 2.30%. The FTSE was off 1.80% and the CAC slipped 1.70%.

U.S. Exchanges saw the same uncertainties and fell. They recovered in late morning but are falling again in mid-afternoon trading. Oil seems to be a bigger deal for the Dow and S&P 500. American investors like the ECB moves better than the Europeans do.

In the world of U.S. economic data, there was more positive news on the employment front. Weekly jobless claims declined 18,000 to a seasonally adjusted 259,000 for the week ended March 5. That’s the lowest reading since mid-October. The previous week's claims were revised to show 1,000 fewer applications received than were previously reported.

So, where was the money going? Gold, as one might expect.

Spot at one point was up over $20, riding the back of a weakening U.S. dollar. Gold futures for the near-month contract shadowed spot prices fairly closely. Regular trading accounted for next to nothing in gold’s rise.

Let’s swing over to the bond situation before explaining more about the dollar’s movement today.

The U.S. 10-year bond yield took a very strong bounce today, rising above 1.925% for the first time since February 1st. Yields had risen as high as 1.95% on the day. This reflects weak interest in the bond naturally.

What yields really tell us today is that the U.S. dollar weakened. The big buck was down against the yen, the Swiss franc and the British pound.

When the tide of sentiment turned against the ECB’s prescription for economic expansion in the euro zone – mainly on Chairman Mario Draghi’s suggestion that the central bank was now done with stimulus measure – the euro began soaring and the dollar suffering.

As of 3PM in New York, the euro is up 1.85% against the greenback.

Wishing you as always, good trading,