German economic sentiment soars as markets await Central bank minutes

The S&P 500 rallied to its
highest level in 5 years as equities continued their positive run
overnight. Most of the increase in equity prices arose due to
positive German Investor confidence, as the index climbed by 16.7
points to hit a 38 month high to 48.2. Most investors are upbeat
that the worst is over for the economies in the Eurozone and the
slow rebound has helped the Euro gain considerable strength as it
breaches the 1.3425 level, in opening trade. The main event today
will be Federal Open Market Committee (FOMC) minutes which will be
released after the European markets close. In other news from
Europe, Moody’s has warned that Spanish banks face continued
liquidity and funding pressures despite most of them being able to
tap the bond market earlier this year.

US manufacturing output has started
the year with a fall, as reports showed that production had dropped
by 0.4% in January, which analysts attribute to the slump in motor
vehicle production. In other markets, the Japanese Yen also rallied
overnight as it clawed back two days’ worth of losses after Finance
Minister Taro Aso said he was not considering foreign bond
purchases as part of an effort to ease Fiscal Policy. However,
Prime Minister Shinzo Abe made contradictory remarks earlier in the
week that such policy options do remain a possibility which has
caused disagreements over monetary policy.

From the UK, Sterling has come
under renewed selling pressure across the board against most
currencies. Investors remain extremely watchful and cautious
leading into the evening given the expected release of the BOE’s
Monetary Policy Committee minutes as well as domestic unemployment
figures. The currency is likely to remain subdued as we lead up to
these events later today and any clear direction will be determined
by the minutes. Markets are extremely cautious as a struggling UK
economy tries to grapple with salvaging its coveted AAA rating and
to try and avoid an almost inevitable triple dip recession.