The story of the week was the ECB’s unexpected decision to reduce policy rates while confirming that they will soon purchase Asset Backed Securities (ABS) and covered bonds. The Euro weakened against most of the major currencies finishing the week at $1.296, falling below $1.30 for the first time in over a year after been near $1.40 earlier in the summer. European equity markets increased while peripheral European bond spreads continued to tighten, with the difference between 10-year Irish and German government bond yields finishing the week at just 0.70%. In the US, equity markets shrugged off poor employment data released Friday to close at an all-time high, up 0.22%, with markets also buoyed by a reported ceasefire in Ukraine.
The growing support for Scottish independence weighed on Sterling last week. A poll released on Sunday put the “Yes” campaign in the lead for the first time, overturning a 22-point lead in the space of a month. What was recently considered a distant possibility is now looking like more of a coin flip with the result likely to come down to which side can get their supporters to the polls in ten days’ time! Speculation is rife that Alex Salmond, Leader of the Scottish National Party, is set to unleash his most potent political weapon to secure Scottish independence; large screens are to be set up in every town and city across Scotland with the movie Braveheart on repeat!
European equity markets have opened marginally lower following a mixed session in Asia overnight. On the macro front this week, there are reports on industrial production and inflation from around the globe. In the US we will get an update on the all-important consumer on Friday with the latest retail sales data and the University of Michigan Consumer Confidence Survey. Employment data from the UK on Wednesday will provide an update on the labour market, a key determinant of the Bank of England’s monetary policy. On the Central Bank front, the minutes from the most recent monetary policy meetings at the Bank of England and the Bank of Japan will be released. Over the weekend China will report on industrial production, retail sales and fixed asset investment.
We can also look forward to the return of the premier league this weekend after being made to suffer through the international football. A week of listening to England’s current and ex-players wax lyrical on why Wayne Rooney makes the perfect England captain is enough for anyone!