European Markets Rallied Higher After Surprise SNB Decision

(RTTNews) - The majority of the European markets surged higher Wednesday, after the Swiss National Bank unexpectedly decided to discontinue its currency ceiling. The European markets initially dropped after the surprising announcement, but then rebounded and remained solidly in positive territory. However, the Swiss stock market sank sharply on the news. The decision has further fueled speculation that the European Central Bank will announced further quantitative easing measures at its January 22 meeting.

The Swiss National Bank shocked the markets Thursday after it abandoned its currency "ceiling" of CHF 1.2 per euro as it considers it "no longer justified" in the new situation. The bank also lowered interest rates further into negative territory to make sure that the termination of the "minimum exchange rate does not lead to an inappropriate tightening of monetary conditions."

The bank lowered the target range for the three-month libor to -1.25 percent to -0.25 percent from the current -0.75 percent to 0.25 percent. The SNB also slashed the interest rate on sight deposit account balances that exceed a given exemption threshold by 0.5 percentage points, to -0.75 percent.

The currency ceiling was introduced in September 2011 when the Swiss franc was exceptionally overvalued. The SNB said the currency ceiling protected the Swiss economy from serious harm. While the Swiss franc is still high, the overvaluation has decreased as a whole since the introduction of the minimum exchange rate.

Eurozone trade surplus set a new record in November, helped by a marginal growth in exports and stagnant imports, and weaker euro is likely to boost demand for exports going forward. The trade surplus rose to a seasonally adjusted EUR 20 billion from EUR 19.6 billion in October, figures from Eurostat revealed Thursday.

Exports rose by 0.2 percent in November from last month when it fell by 0.1 percent. At the same time, imports remained flat after falling 1.2 percent in October.

Germany's economy grew the most in three years during 2014 amid record high employment, largely led by domestic demand and investments, and the country recorded a fiscal surplus for the third consecutive year. Gross domestic product grew 1.5 percent, in line with economists' expectations, preliminary data from Destatis showed Thursday. The figure was much better than the modest 0.1 percent growth in 2013.

The Euro Stoxx 50 index of eurozone bluechip stocks increased by 1.95 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 3.08 percent.

The DAX of Germany climbed by 2.20 percent and the CAC 40 of France rose by 2.37 percent. The FTSE 100 of the U.K. gained 1.73 percent, but the SMI of Switzerland sank by 8.67 percent.

In Frankfurt, Beiersdorf climbed by 5.60 percent. The Nivea maker reported increased sales for the year.

ThyssenKrupp increased by 4.19 percent and Siemens added 2.01 percent.

Deutsche Bank climbed by 1.98 percent and Commerzbank gained 0.80 percent. Insurer Hannover Rueck rose by 2.08 percent, after HSBC cut the stock to "Neutral" from "Overweight."

In Paris, Lafarge climbed by 2.42 percent and Airbus added 2.50 percent.

Societe Generale rose by 1.49 percent. Credit Agricole gained 2.13 percent and BNP Paribas increased by 2.56 percent.

Technip advanced by 3.19 percent and Total rose by 2.78 percent.

In London, Tullow Oil dropped by 0.84 percent, after it issued an operational update. BP increased by 2.73 percent and Royal Dutch Shell added 2.89 percent.

Randgold Resources surged by 6.36 percent, due to the rise in gold prices.

J Sainsbury and Morrison Supermarkets rose 5.02 percent and 5.03 percent, respectively.

Richemont and Swatch plunged by 15.50 percent and 16.35 percent in Zurich, in response to the SNB decision.

With energy prices showing another substantial decrease, the Labor Department released a report on Thursday showing that U.S. producer prices saw their biggest drop in over three years in the month of December.

The Labor Department said its producer price index for final demand fell by 0.3 percent in December following a 0.2 percent drop in November. The drop by the index reflected the biggest decrease since October of 2011, although economists had expected the index to slide by 0.4 percent.

In a potentially troubling sign for the labor market, the Labor Department released a report on Thursday showing that first-time claims for U.S. unemployment benefits jumped to a four-month high in the week ended January 10th

The Labor Department said initial jobless claims climbed to 316,000, an increase of 19,000 from the previous week's revised level of to 297,000. Economists had expected jobless claims to inch up to 295,000 from the 294,000 originally reported for the previous week.

After reporting an unexpected contraction in regional manufacturing activity in the previous month, the Federal Reserve Bank of New York released a report on Thursday showing that business activity for New York manufacturers has expanded in January.

The New York Fed said its general business conditions index jumped to a positive 10.0 in January from a negative 1.2 in December, with a positive reading indicating growth in regional manufacturing activity. Economists had expected the index to climb to a positive 5.0.

Manufacturing activity in the Philadelphia area grew at a notably slower pace in the month of January, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday. The Philly Fed said its diffusion index of current activity tumbled to 6.3 in January from 24.3 in December, hitting its lowest level since last February.

While a positive reading indicates continued growth in regional manufacturing activity, economists had expected the index to show a much more modest decrease to 20.0.