Stocks and bonds rally as investors wait for ECB
European bourses rose on Thursday as investors looked ahead to a rate call from the European Central Bank that could see it becoming the latest major global monetary policy institution to open the way for further monetary stimulus.
But wider concern at faltering global economic growth lingered, helping eurozone government bond markets rally in tandem with stocks, extending a run of record lows for Germany’s 10-year Bund yield. It fell to minus 0.23 per cent, down 1 basis point.
The Europe-wide Stoxx 600 climbed 0.6 per cent, with resource stocks in demand. London’s FTSE 100 also added 0.6 per cent, with Frankfurt’s Xetra Dax 30 up 0.7 per cent.
The euro was 0.1 per cent firmer for the day at $1.1233, leaving its fall for 2019 at just over 2 per cent.
The ECB’s policymakers meet after a series of dovish turns from central banks in response to mounting concerns over global growth. The health of the eurozone economy, including a sharp slowdown in inflation and mixed economic data, was likely to set the tone for the announcement.
“The market is already pricing in some chance of ECB rate cuts and simultaneously telling us that it is not enough to lift inflation expectations. If the ECB wants to fight back, a hint is needed that quantitative easing can be restarted”
Jamie Searle, European rates Strategist at Citi
Meanwhile optimism faded that the US and Mexico could strike a deal to avert proposed tariffs and subsequent escalation in global trade tensions after US President Donald Trump tweeted that, while talks on immigration curbs were progressing, it was “not nearly enough”. Mexico’s peso weakened by 0.6 per cent to the bottom of its recent trading range.
S&P 500 futures were pointing to gains of 0.3 per cent when Wall Street opens on Thursday after it rose 0.9 per cent overnight, leaving it up almost 3 per cent since the Federal Reserve signalled a willingness to cut interest rates.
- 12.45: ECB interest rate decision
- 13.30: US trade balance data (all London times)
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