Bad news is good again - Draghi and Carney send stocks soaring

Local markets are set for back to back gains after a week of sharp reversals.

Central bankers took centre stage again overnight, this time in Europe, with unprecedented reassurances and guidance over the future direction of interest rates.

They are going nowhere for a very long time and if they do move, it’ll be downwards. So said European Central Bank president Mario Draghi, with similar sentiments expressed by his newly appointed counterpart at the Bank of England, Mark Carney.

The scent of cheap cash was enough to send European markets soaring between 2% and 3% which, given Wall Street’s July 4 holiday overnight, should see the Australian market lurch back into positive territory.

After a week of dramatic rises and falls, it’s possible that Australia may just end the week exactly where it began. All that volatility and nothing to show for it (see Carr's Call: Four danger signals for domestic investors).

BHP and Rio Tinto both experienced strong gains in London and so are likely to attract strong support this morning, which should spill over into other miners.

BHP added 3.5% while Rio stacked on 4.1%, both aided by some strengthening in the iron ore price.

Oil slipped slightly as tensions eased over the ousting of Egypt’s President Mohamed Morsi, although prices remain elevated, with West Texas Intermediate for August down 14 cents to $US101.10 a barrel.

Markets remain in the grip of central bankers with currency traders selling pounds and euros overnight, pushing the US dollar higher.

Despite the weaker prognosis for the European and UK economies, the Australian dollar slipped against both currencies and was slightly lower against the US dollar this morning at US91.41c.

Stock traders may have welcomed news of the poor European economic outlook. But all eyes are focussed on key unemployment numbers coming out of the US tonight.

Nonfarm payroll statistics are expected to show an improvement, with unemployment dropping to 7.5% from 7.6%. An improvement in unemployment is likely to reignite speculation on the timing of the US Federal Reserve’s plans to wind back on its massive stimulus program. Good news will be received poorly by equity traders.