IIFT Daily Note with Peter Brown

Stocks post new high.

Posted by:  |  Time: 7:35 am  |  Topic:
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In the absence of any bad news stocks have shown their continued ability to reach new highs. The strength of the market is surprising only because of the time of year. We would have expected a few big fund managers to have started to cash in at this stage but as yet there is no sign of it. Equities continue to be a buy on any dip.

The big event today is the ECB. First up at 12.45 is the rate decision. I do not expect a cut, so a little bounce in the Euro there. The main event is Mr Draghi speech at 13.30 It is the tone he uses that is important. Hints as monetary easing will drop the Euro significantly. More LTRO or other measures to get banks lending is expected. If he says anything dramatic (which I doubt) it could get volatile on the downside for the Euro. His outlook on inflation and comments about it falling will be key. If he chooses to ignore the inflation issue and state that everything is fine Euro will shoot up.

A straddle trade is tricky here because it is a speech. The tone can change sentence to sentence. You can straddle the interest rate decision though.

Levels today are  Euro 1.3550  1.3440   S&P (DEC) 1770  1760  Wall St (DFB) 15750  15600

 

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