Dow Futures Pare Declines As ECB Boosts Coronavirus QE Program to €1.35 Trillion

The European Central Bank boosted its Pandemic Emergency Purchase Program past €1.3 trillion today, adding further cash to market already supported by $2.4 billion in central bank purchases each and every hour.

The Thursday Market Minute

  • Global equity rally eases heading into Thursday's European Central Bank policy meeting in Frankfurt.
  • ECB expected boosts its coronavirus bond buying program by €600 billion as central bank support continues to boost equity markets around the world. 
  • US government division over the use of Federal troops to quell violent protests against the death of George Floyd could complicate the nation's response heading into the tenth day of unrest.
  • Global oil prices ease as OPEC members, as well as Russia, fail to hold a virtual meeting that would have discussed extending or deepening output cuts.
  • U.S. equity futures suggest the first down day in five for Wall Street ahead of the ECB policy decision at 7:45 am Eastern time and weekly jobless claims data at 8:30 am Eastern time.

U.S. equity futures edged lower for the first day in five Thursday as investors paused a global rally that has lifted world stocks to the highest levels in three months after a key European Central Bank meeting that added billions more in stimulus to a market already awash with rescue cash.

The ECB boosted its coronavirus bond buying program by a larger-than-expected €600 billion Thursday -- and extended by around six months to June of 2021 -- while issuing a downbeat growth and inflation forecast for the region's blighted economy.

Wall Street surged to three-month highs last night as a far better-than-expected reading of private sector job losses for the month of May, based on data from payroll provider ADP, added to evidence of a steady global economic recovery from the cornonavirus pandemic.

Central bank support, however, as well as spending pledges from governments around the world, is also a huge factor in the recent rally, which has lifted the Nasdaq to near-record highs and put the S&P 500 to withing 8.1% of its February peak.

With central banks buying $2.4 billion worth of financial assets every hours in order to keep markets stable during the worst of the coronavirus crisis, and governments from Brussels to Tokyo making recent pledges to spend billions more, investors have been largely sanguine over market risks such as U.S.-China trade tensions and domestic protests linked to police brutality and the death of George Floyd in Minneapolis on May 25.

Still, with the ECB decision out of the way, and the S&P 500 on a run that has included only three down days over the past three weeks, investors took their foot off the gas overnight and appear set to allow Wall Street to open modestly lower.

Futures contracts tied to the Dow Jones Industrial Average are priced for a 150 point pullback while those linked to the &P 500, which is only down 3.34% for the year, are set for a 21 point slip.

European stocks, meanwhile, are also trading in the red ahead of the ECB decision, with auto shares leading the decline following the agreement of a €130 billion coronavirus rescue package by Germany's coalition government that directed cash to the production of electric vehicles. 

The Stoxx 600 benchmark, which was gained 4.8% so far this month, was marked 0.45% lower in early Thursday trading while the euro slipped to 1.1198 against a modestly firmer U.S. dollar.

Britain's FTSE 100 was little-changed by mid-morning trading in London, although the pound held at 1.2509 against the greenback.

Away from equities, benchmark 10-year U.S. Treasury bond yields eased to 0.751% even as the 'risk on' move in global markets faded somewhat, while the U.S. dollar index, which gauges the greenback against a basket of six global currencies, was marked 0.327% higher at 97.603.

Oil prices faded, however, as OPEC producers, as well as non-member allies such as Russia, failed to hold a virtual meeting today that could have allowed for discussion of deeper and long output cuts, with the current agreement from April currently taking 9.7 million barrels from the market each day. 

WTI contracts for July delivery were marked 53 cents lower from their Wednesday close in New York and changing hands at $36.76 per barrel while Brent contracts for August, the new global benchmark, were seen 31 cents lower at $39.48 per barrel.

Overnight in Asia, Japan's Nikkei booked its fourth-straight session gain to close 0.36% higher at 22,695.74 points while the region-wide MSCI ex-Japan benchmark was last seen 0.34% higher heading into the close of trading, as solid gains in Australia offset modest pullbacks in Shanghai and Shenzen.