- ECB President Mario Draghi says the central bank could cut rates amid stubbornly low inflation
- Dow futures gain 112 points or 0.4%, S&P 500 futures up 0.5% as Draghi’s remarks supports hope of easier monetary policy
- Facebook officially launches its foray into cryptocurrencies, Libra coin
U.S. stocks on Tuesday were set to extend the previous session’s gains ahead of the start of the Federal Reserve’s two-day policy meeting. Dovish comments made by Mario Draghi, the European Central Bank president, may add support to hope of easier Fed policy.
How are benchmarks faring?
Futures for the Dow Jones Industrial Average
rose 152 points, or 0.6%, at 26,287, those for the S&P 500 index
advanced 17.95 points, or 0.6%, at 2,914.25, while Nasdaq-100 futures
climbed 81 points, or 1.1%, at 7,642.75.
On Monday, the Dow
rose 22.92 points to 26,112.53. The S&P 500
climbed 2.69 points to 2,889.67 and the Nasdaq Composite Index
added 48.37 points, or 0.6%, to 7,845.02.
What’s driving the market?
ECB President Mario Draghi at an annual central bank conference in Sintra, Portugal said policy makers would consider “in the coming weeks” how to adapt its policy tools “commensurate to the severity of the risk” to the economic outlook, a signal that the central bank may be willing to lower rates. The central banker’s remarks sent the euro
sliding against the U.S. dollar
Draghi’s comments come as the Federal Reserve is set to kick off its policy-setting meeting later Tuesday, with expectation that the Fed will indicate its willingness to reduce benchmark borrowing costs this year amid global trade tensions, a slowdown in the global economy as well as in the U.S. Investors will want to see if those expectations match up to what the Fed is thinking, though no move on interest rates is expected at this week’s meeting.
What are strategists saying?
“The prospect of ‘additional stimulus’ jolted stock markets higher, and it appears the ECB is following in the Fed’s footsteps of using dovish language,” wrote David Madden, market analyst at CMC Markets UK, in a Tuesday research note.
“And his comments will add further pressure on the US Federal Reserve to cut rates. Following his speech, yields on a 10 year bund headed further into negative territory – to around 30bps – forcing people’s hunt for yield to continue apace,” Mark Benbow, manager of the Kames Short-Dated Yield Bond Fund, said in a note.
Which stocks are in focus
Facebook Inc. shares
were rising more than 2% in premarket trade Tuesday after the social-media giant unveiled its cryptocurrency, Libra coin, offering users the ability to make payments on the internet.
Which data are in focus?
A report on new housing starts showed that builders started new homes at a pace of 1.269 million in May, the Commerce Department said Tuesday. They applied for permits at a seasonally adjusted annual 1.294 rate. Economists surveyed by MarketWatch had forecast a pace of 1.23 million starts and 1.30 million permits.
How are other assets trading?
Hong Kong’s Hang Seng Index
rose 1% and China’s Shanghai Composite Index
inching up less than 0.1%. Japan’s Nikkei 225
fell 0.7%, while in Europe, the Stoxx Europe 600
headed 1% higher after Draghi’s comments.
Meanwhile, the 10-year Treasury note
was trading at a 21-month low at 2.02%, while the comparable German debt
known as the bund, was trading around a record-low yield at negative 0.313%. Bond prices and yields move in the opposite direction.
West Texas Intermediate crude futures
were edging lower, gold futures
bounded higher even as the U.S. dollar bucked up against the euro, with the ICE U.S. Dollar index
climbing 0.1% at 97.68.
Source : MTV