Global stocks rebounded following a speech from European Central Bank President Mario Draghi, which suggested that the ECB will provide more stimulus, either through new rate cuts or asset purchases, if inflation does not pick up. The optimism of investors for the continuation of the easy monetary policy spread from Asia through Europe to the US, coloring the main stock indexes in green. However, the worries over the Middle East and another chip sector warning on trade limit the gains.
The ECB governor Mario Draghi defended the tools that the organization has available, saying that its asset purchase program still has considerable headroom.
The markets are focused on the approaching Federal Reserve meeting on monetary policy. No changes in policy are expected, and investors will seek signals of potential interest rate cuts by the end of this year.
Recent speeches by Fed representatives, including Bank Governor Jerome Powell, show increasing caution of inflation expectations and a willingness to act if needed. The Open Market Monetary Commission is expected to shape this point of view on Wednesday, hinting that short-term interest rate cuts are forthcoming The Fed is expected to make a formal statement to the media after its meeting tomorrow (Wednesday, June 18).
According to the economists, the central banks of Japan and Indonesia, which will also meet later this week, may be influenced by the Federal Reserve’s decision.
Investors continue watching the trade tensions between the US and China. A number of US businessmen have openly opposed the imposition of duties on an additional set of imported Chinese goods. They warn that this will have an impact on consumer prices.
Asian markets recap
Most of the main stock indexes in the Asia-Pacific region ended today’s trading session into the green with investors expecting the start of the two-day US Federal Reserve meeting.
In China, the mainland index Shanghai Composite advanced by a minimum of 0.08% to 2,889.81 points. Hong Kong’s benchmark Hang Seng rose 328.68 points, or 1.21%, to 27,555.84 points. The shares of the Tencent technology company rose by more than 1%.
The blue-chip index of the Tokyo Stock Exchange, Nikkei 225, fell by 151.29 points, or by 0.72%, to 20,972.71 points. The shares of Fast Retailing, SoftBank Group and Fanuc fell. The best performers within the index had Tokuyama and Amada Co, adding 1.97% and 1.67%, respectively.
In South Korea, the local index Kospi rose by 0.38% to 2,098.71 points. The shares of the pharmaceutical company Celltrion added more than 1% to their value.
In Australia, the S&P ASX 200 advanced by 39.10 points, or 0.60%, to 6,570 points. On Tuesday, the Reserve Bank of Australia released minutes from a policy meeting in June, which saw it easing its cash rate to 1.25%. According to the minutes, members agreed that further rate cuts were “more likely than not” in the period ahead, although there were other ways to reduce unemployment.
European markets mid-session rcap
European stocks edged higher on Tuesday amid Mario Draghi speech for providing more stimulus by the ECB if inflation does not pick up.
The pan-European Stoxx 600 recovered from an early drop to climb 0.76% during the speech, rising to 381.33 points. Basic resources stocks led gains with a 1.3% rise, while only a handful of sectors remained in the red.
German index DAX 30 edged higher by 91.25 points, or 0.76%, to 12,177.07 points at 10:00 GMT. The stocks of the chipmaker Infineon sank by 4.65% after the company launched an accelerated capital increase to raise 1.5 billion EUR (1.68 billion USD) towards its planned acquisition of Cypress Semiconductor. German chipmaker Siltronic tumbled 10.3% after it warned US restrictions on exports to China would hurt business, saying Q2 sales would be “significantly below” the first quarter and were likely to decline further. The stocks of carmakers are slightly higher with Volkswagen adding 0.2% and Daimler inching higher by 0.5%. The software giant SAP is up by 1.25%, while pharmaceutical company Bayer is up by 1.2%.
French index CAC 40 is up by 1% to 5,445.68 points at mid-session trading. The shares of Renault jumped by 1.65%, while its competitor Peuoget added 0.3%. The stocks of Airbus are gaining 0.8%.
British index FTSE 100 added 0.54% to 7,397.02 points. Tool hire firm Ashtead rose 1%, outperforming the FTSE 100, while miners were up 1.1% at a near two-month high as a key mine in Chile halved output due to a strike, pushing copper prices higher. Drugmaker AstraZeneca was the second-biggest boost after its cancer medicine Lynparza was approved as a first-line maintenance treatment for a type of advanced ovarian cancer by the European Commission. Rival GlaxoSmithKline also climbed. Shares in contractor Kier Group gained 4.2% after steep falls in the previous session when it announced plans to sell some businesses, suspended its dividend and said it would cut hundreds of jobs.
Wall Street pre-session recap
Wall Street stock index futures were slightly higher Tuesday morning, as market participants braced for the first day of the Federal Reserve’s interest rate meeting.
At around 6:30 a.m. ET, Dow futures traded 80 points higher, indicating a positive open of more than 89 points. Futures on the S&P and Nasdaq were also seen higher.
Market focus is largely attuned to the US central bank, with policymakers set to begin a two-day meeting later on Tuesday.
On the data front, housing starts and building permits for May are scheduled for 8:30 a.m. ET.