European Market Update 3/21 - BOE Votes 8-1; Blanchflower Votes for Rate Cut

- The European indices are currently trading in positive territory, but are off of session highs and sit near the unchanged level. European indices were led higher by the banking sector on merger related news as well as a sector upgrade at Goldman Sachs. Oil stocks are also helping the European indices after a sector upgrade at HSBC overnight.
- European government bonds are currently trading higher in the session after some comments from the ECB’s Trichet, gaining further support from the BOE minutes. Gilts jumped sharply upon the release of the BOE minutes as one member unexpectedly voted for a rate cut.
- Italian consumer confidence rose to its second highest level in over four years at 112.6. Consumer confidence rose as signs on signs that economic growth will be maintained by stronger household spending. In other Italian economic news, the forth-quarter unemployment rate fell to its lowest rate in over a decade at 6.5% below expectations of 6.7%.
- In a speech delivered to Parliament the ECB’s Trichet said that risks to price stability exist in the medium to long term, noting that rate hikes will anchor inflation expectations. Trichet reiterated that annual inflation is likely to decline in later in the year. Trichet said that there are currently some upside risks to price-stability, and assured that the ECB will be watching wage deals carefully.
- The Bank of England minutes from the March 8 policy-setting meeting showed that the BOE’s monetary policy committee voted 8 to 1 to keep rates unchanged at 5.25%, with Blanchflower representing the dissenting voter. While most analysts anticipated that Sentance and Beasley would represent the dissenters, voting for a rate hike in a 7 to 2 vote to keep rates unchanged, the BOE’s Blanchflower voted for an interest rate cut at the March 8 meeting. Blanchflower said that wage pressures in the UK are benign, upside risks from wage growth are diminishing, and that there is a considerable spare capacity in the labor market.
- Front month crude oil futures are currently trading higher in the session ahead of the EIA inventory data today on little energy news.