European Stocks Called Higher as U.S. Debt Deal Boosts Markets and ECB Awaits
European stocks are expected to open modestly higher Thursday as investors react to a surprising deal on the U.S. debt ceiling and prepare for what could be a pivotal meeting of the European Central Bank later today in Frankfurt.
Germany's DAX performance index is slated to add around 0.38% at the opening bell, according to financial bookmakers IG, with slightly smaller gains priced in for benchmarks in France, Spain and Italy. Britain's FTSE 100, however, is likely to open little-changed from last night's close, owing to both a pullback in global oil prices overnight and a strong pound sterling, which traded firmly over the 1.30 mark against the U.S. dollar in Asia trading.
Global markets were given a surprise slice of support late Wednesday in the form of a three-month agreement on the U.S. debt ceiling between President Donald Trump and Democratic lawmakers. If passed by the Republican-controlled House of Representatives, it would suspend the ceiling until December 15 and avoid an unprecedented default on U.S. Treasury bonds, as well as a broader government shutdown.
European investors are setting up for the September rate decision and press conference from the ECB later today in Frankfurt amid some speculation that President Mario Draghi could offer the first definitive signal of a wind-down in the Bank's €60 billion program of quantitative easing.
The euro's advance -- it has gained nearly 12% against the dollar since the start of the second quarter -- are making those predictions increasingly difficult to justify. Fresh inflation forecasts from the Bank's economists, which will be released during Draghi's press conference, are expected to trim June's projections of a 2017 average of 1.5% and a 2018 dip to 1.3%, as those figures were based on an euro/dollar rate in the 1.09 to 1.11 region and Brent crude prices in the $51.00 range.
Overnight in Asia, the U.S. dollar index, which measures the greenback's strength against a basket of six global currencies, extended declines to around 92.18, although that led only to a modest gain for the yen as investor sentiment in the region stabilised. That allowed the benchmark Nikkei 225 to rise 0.2% to the close the session at 19, 396.52 points while the broader MSCI Asia ex-Japan index edged 0.03% higher in the start of European trading.
U.S. equity futures, however, are suggesting a pullback from yesterday's closing levels, perhaps linked to the looming human and economic damage that a triple-threat of Hurricanes, including the category 5 Irma, could bring to the southeast United States later this week as they bear down on the Florida and south Texas coasts.
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