Bloomberg

The Thursday Market Minute

  • Global stocks extend gains as Trump offers "goodwill" gesture to China on tariffs, suggesting potential progress in October talks.
  • ECB pushes one of its key interest rates deeper into negative territory, and re-started its controversial quantitative easing program.
  • European stocks hit six-week high on easing trade tensions and near-term policy support, euro slides to 109.59 against the greenback.
  • Wall Street futures suggest the Dow could extend its six-day winning streak with a soild opening bell gain ahead of the ECB rate decision at 7:45 Eastern time and August inflation data at 8:30 eastern time.

Market Snapshot

Global stocks extended solid gains again Thursday as investors reacted to a key policy statement from the European Central Bank and signals of potential progress in U.S.-China trade talks.

The ECB pushed one of its key interest rates deeper into negative territory Thursday, and re-started its controversial quantitative easing program, in one of the final decisions under the eight year tenure of President Mario Draghi.

The ECB increased the charge it applies to regional lenders holding cash in the central bank's overnight deposit facility by 10 basis points to -0.5%, matching the lowest rate withing the Bank's targeted lending operations. It also said it would re-start the dormant quantitative easing program on November 1 with monthly purchases of government, agency and corporate bonds of around €20 billion. No changes were made to the Bank's main refinancing rate, which sits at 0%.

The euro slipped 0.5% lower to 1.0966 against the U.S. dollar immediately following the ECB rate move, the first reduction since 2016, while benchmark 10-year German bund yields traded more deeply into negative territory at -0.638%. Spot gold prices rose 0.8% to $1,509.10 per ounce.

European Central Bank, acting quickly, Cuts Rates 10 Basis Points. They are trying, and succeeding, in depreciating the Euro against the VERY strong Dollar, hurting U.S. exports.... And the Fed sits, and sits, and sits. They get paid to borrow money, while we are paying interest!

— Donald J. Trump (@realDonaldTrump) September 12, 2019

Benchmark 10-year Treasury note yields rallied 4 basis points to a session low of 1.68%, helping boost futures contracts on the Dow Jones Industrial Average to indicate a 90-point opening bell gain.

Investor sentiment was also supported by a late Wednesday Tweet from President Donald Trump, who said he would offer a two-week delay on the imposition of tariffs on $250 billion worth of China-made goods as a "good will" gesture towards Beijing as the two sides prepare for high-level trade talks next month. Earlier this week, China said it was exempting some U.S. goods from additional tariffs in a move that signaled potential thawing in the ongoing trade dispute between the world's two biggest economies. 

....on October 1st, we have agreed, as a gesture of good will, to move the increased Tariffs on 250 Billion Dollars worth of goods (25% to 30%), from October 1st to October 15th.

— Donald J. Trump (@realDonaldTrump) September 11, 2019

U.S. equity futures look set to extend Wall Street's winning streak to a seventh consecutive session Thursday, with contracts tied to the Dow Jones Industrial Average suggesting a 90 point gain while those linked to the S&P 500, which closed above the 3,000 mark for the fist time since July 30, indicate a 9 point bump higher for the broader benchmark.

European stocks rose were also on the rise with investors factoring in ECB rate decision and eyeing the hour-long press conference with President Mario Draghi at 8:30 am Eastern time.

The Stoxx 600 was marked 0.48% higher in Frankfurt after trading past the 391 point barrier for the first time since July 30, while Britain's FTSE 100 gained 0.29% in London as the pound eased from its recent gains against the U.S. dollar to 1.2316.

Overnight in Asia, a weaker yen helped lift Japan's Nikkei 225 0.75% higher by the close of trading in Tokyo, while the olive branches on trade from Washington and Beijing pushed the region-wide MSCI Asia ex-Japan benchmark to a six-week high of 513.58 points. 

Global oil prices retraced some of their losses from yesterday in early Thursday trading, supported by both the potential progress in U.S.-China trade talks and the bigger-than-expected 6.1 million barrel decline in domestic crude stocks publish by the Energy Department.

Those gains were reversed, however, after the International Energy Agency said it sees no moves by OPEC towards deepening production cuts that will continue to take 1.2 million barrels from the market each day until early next year.

Brent crude contracts for November delivery, the global benchmark, were seen 77 cents lower from their Wednesday close in New York and changing hands at $60.04 per barrel in early European trading while WTI contracts for October were marked 57 cents higher at $55.18 per barrel.