Risk aversion was the guiding factor Thursday with the ECB President (Trichet) discussing concerns for growth after releasing an unchanged interest rate decision. Overall sentiment was risk averse to begin with but the ECB’s dovish tone did nothing to bring support to weakening equity markets.

The next major event risk is the US jobs data and if the negative expectations are correct we can expect equities to continue lower along with high-yielding currencies. The Euro Stoxx 50 index dropped 3.3% last session and the S & P 500 saw even larger declines of 4.78%. The EUR/USD fell to 1.4110-1.4290 while the USD/JPY is settling in the middle of a volatile range at 78.60-80.30.

At its policy meeting, the ECB left interest rates unchanged at 1.50% (inline with expectations) and the accompanying statement gave markets an indication that the bank has turned dovish and that growth concerns are outweighing the current inflation problems seen in some Eurozone areas. Commenting on the macro data, reference was made to the slowing momentum in quarterly GDP figures and the negative prospects that are being created by market uncertainty in many global regions. Essentially, the message was that we should not expect a rate hike from the ECB any time soon unless inflation data surprises to the upside. As long as this is the case, the Euro will likely be viewed as a “sell” on rallies.

In Japan, the Economy Minister (Yosano) commented on the intervention activity from Thursday and said that there is a possibility that the BoJ could act again if market volatility does not stabilize. The intervention was unilateral (Japan only) so while the short term reaction was clearly visible, the Yen was unable to maintain a foothold above the 80 level against the US Dollar. Yen strength is seen as a negative for Japanese export companies and the BoJ concerns remain as the country continues to rebuild from its March earthquake.

In England, the BoE kept interest rates unchanged at its policy meeting and made no changes to its asset purchase program (which is currently equal to 200 billion British Pounds). There is no significant macro data today out of the UK so most of the attention will be on the US session as equities will take their lead from the results of the US NFP data. Market reaction to the report could produce drastic swings in both directions as markets are currently being forced to rework the definition of “risk assets” and many of the usual asset correlations have lost strength in recent weeks. spread betting companies