The Thursday Market Minute
- U.S. equity futures suggest Wall Street could snap a three-day losing streak, the longest of the year, after the European Central Bank changed its forward rate guidance amid a slowing global economy.
- European stocks drift from five-month highs after the ECB said rates will remain at record lows until at least the end of the year, with fresh growth and inflation forecasts and a new bank lending program.
- Oil prices bounce higher despite yesterday's big build U.S. crude stocks as Venezuela sanctions, as well as OPEC production cuts, lift both Brent and WTI futures.
- Dow futures suggest an 35-point opening bell gain ahead of fourth quarter earnings from Costco and initial jobless claims data.
Wall Street looks set to snap its three-day losing streak Thursday, the longest of the year, after the European Central Bank made a surprise change in its forward guidance, pledging to keep rates at near-record lows until at least the end of the year in a move that effectively ensures the Federal Reserve won't be able to tighten its own policy in the near term.
The ECB had planned to modestly tighten its monetary policy near the end of this summer, but said Thursday that rates will remain "at their present levels at least through the end of 2019", a move that not only marks a sharp change in the bank's guidance but also guarantees that ECB President Mario Draghi will serve out his seven year term in Frankfurt without ever having raised interest rates.
The Bank also said it would launch a new lending program for the region's commercial banks, known as targeted longer-term refinancing operations, TLTROs, which will start in September and last for at least two years.
Wall Street future sharply reversed their earlier declines following the ECB decision, with contracts tied to the Dow Jones Industrial Average I:DJI now indicating a 10.5 point gain for the benchmark at the start of trading today while those linked to the S&P 500 I:GSPC suggest a single point advance for the broader benchmark.
The ECB's move, which may also come with downgrades to growth and inflation forecasts later this morning, also likely means President Mario Draghi will serve out his seven year term, which ends in November, without ever having raised interest rates in the world's biggest economic bloc, underscoring its inability to sustain consistent growth since the 2012 debt crisis.
The decisions pushed the euro to 1.1265 against the U.S. dollar, a 0.4% decline on the session and a move that extends the currency's six-month side to around 4.33%. Benchmark 10-year German bund yields, a proxy for risk-free interest rates in the currency area, fell to 0.109%, while the Stoxx Europe 600 index pared declines to a 0.21% fall on the session.
With that in the background, and the U.S. corporate earnings session gliding towards a close, investors have felt more comfortable in defensive positions of late, opting to take profits from a market that's had it best start to any year since 1991.
Global oil prices, however, bucked the defensive trend and rose sharply in early Thursday trading as investors shrugged off a bigger-than-expected build-up in domestic crude supplies, which hit a December 2017 high last week, and focused on the impact of U.S. sanctions on the sale of oil from Venezuela and ongoing production cuts from OPEC and its non-member allies.
Brent crude contracts for May delivery, the global benchmark, were marked 81 cents higher from their Wednesday close and changing hands at $66.8 per barrel while WTI contracts for April were seen 58 cents higher at $56.80 per barrel.