Greg & Colin Thornton

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Financial Market Update

Global markets are down reacting negatively to the ECB policy decision to keep rates on hold and wait for early 2015 to reassess the situation. Market reaction most likely comes from the substantial downgrade by the ECB on the region’s future growth and inflation outlook through to 2016. Like it or not, European leaders must resign to realize that QE, especially in light of much higher deflation threat from falling oil prices is on the table. With the ECB announcement the USD index is making gains against all major currencies with the Yen almost touching 120. So Europe is marred in the red with France leading decliners down 1.50% while overnight in Asia markets again surged with Shanghai up 5.10% on continued speculation of more stimulus measure next week.

In the U.S. equity markets are retreating from record highs and also slumping on the ECB announcement. Bonds are rallying while energy stocks led decliners. On the data front, last week’s initial jobless claims fell by 17K to 297K with the 4 week average just shy of 300K. In corporate news, the largest grocery chain Kroger beat Q3 estimates and raised its full year outlook. On the other hand bookseller Barnes& Noble disappointed on Q2 results due to lower sales and revenue but announced it will be buy Microsoft's share in its Nook tablet business for U$123mln. The stock is down 13% this morning.

In Canada, The TSX is declining with all sectors in the red after the ECB announcement and aided by soft earning results from TD and CIBC. The energy sector is being walloped, down 4.20% with Financials a distant second -  down 1.40%. TD and CIBC report Q4 results with TD reporting weaker than expected earnings on higher provisions for credit losses and other costs while CIBC results were mostly in line. On the bright side, Enbridge is surging after announcing it will be moving $17bln in assets to its affiliate Enbridge Income Fund Holdings Inc. raising its dividend by 33% And on a side note, CDN Oil sands slashed its dividend by 42%.

S&P500 is up 1 to 2,074 , the DOW is up 55 to 17,884 and the TSX is down 78 to 14,844.

The Loonie is down 6bps to US$0.8793. Bond yields are down with the CDA 5-year at 1.44% and the 10-year is at 1.93%. Gold is up 90 cents to US$1,210/oz. Silver is up 17 cents to US$16.59/oz, natural gas is down 12 cents to US$3.69/btu, copper is up 4 cents to US$2.91/lb and Oil is down 97 cents to $66.41/barrel. 

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