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Markets See Global Risk Rally on Negative ECB Rates
Today's financial recap and tomorrow's financial outlook.
Minyanville Staff    

The event the market had been waiting for finally arrived: the ECB's rate decision, and it was one for the history books. The central bank lowered its deposit rate by 10bps to -0.1%, main refinancing rate to 0.15%, and marginal lending rate by 30bps to 0.4%. In addition, the ECB announced that it would cease sterilizing its existing Securities Market Programme (SMP) bond holdings, make targeted very long-term loans to banks, and lay the groundwork for future purchases of asset-backed securities. The last point was viewed by market participants as the preliminary step before the central bank would begin broader asset purchases. The move by the ECB to negative deposit rates is unprecedented for a developed market central bank.

Effectively, Mario Draghi pushed a big portion of his chips into the middle of the table to combat deflationary forces in the eurozone by increasing the supply of available credit.

Risk assets responded accordingly, although the euro / US dollar cross recovered all of its losses and finished positive by the time US equity markets closed. Italian equities, as represented by the FTSEMIB (INDEXBIT:FTSEMIB), was the best performing group in Europe today, followed by France and Spain. European sovereign bonds also performed very strongly. The Italian 5-year bond yield fell by 12.4 basis points to 1.59%, below similar maturity US Treasuries.

US equities weren't left out from the global risk rally. The S&P 500 (INDEXSP:.INX) got off to a slow start, but ended up higher by 0.65%.  All 10 basic sectors of the S&P 500 gained on the day, led by industrials and financials. In the KBW Bank Index (INDEXSP:BKX), all 24 of its components increased. On a beta-adjusted basis, the small-cap Russell 2000 (INDEXRUSSELL:RUT) outperformed by 0.8%, and tech stocks saw similar gains.

Tomorrow's Financial Outlook

There is another significant event for global markets this week: the US May nonfarm payrolls, which will be reported tomorrow morning at 8:30 a.m. EDT. Economists expect a net increase of 215,000 payrolls after an increase of 288,000 last month. Due to the severe drop in the participation rate, they expect unemployment to increase to 6.4% from 6.3% in April. Although this past Wednesday's private payrolls report showed disappointing labor activity in May, market participants expect the government figure tomorrow to exceed expectations.

Outside of the US, Germany will report its April trade balance and industrial production. Also, Canada will report its May employment report at the same time as the US.

There are no major earnings reports scheduled.


Twitter: @Minyanville

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
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No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Markets See Global Risk Rally on Negative ECB Rates
Today's financial recap and tomorrow's financial outlook.
Minyanville Staff    

The event the market had been waiting for finally arrived: the ECB's rate decision, and it was one for the history books. The central bank lowered its deposit rate by 10bps to -0.1%, main refinancing rate to 0.15%, and marginal lending rate by 30bps to 0.4%. In addition, the ECB announced that it would cease sterilizing its existing Securities Market Programme (SMP) bond holdings, make targeted very long-term loans to banks, and lay the groundwork for future purchases of asset-backed securities. The last point was viewed by market participants as the preliminary step before the central bank would begin broader asset purchases. The move by the ECB to negative deposit rates is unprecedented for a developed market central bank.

Effectively, Mario Draghi pushed a big portion of his chips into the middle of the table to combat deflationary forces in the eurozone by increasing the supply of available credit.

Risk assets responded accordingly, although the euro / US dollar cross recovered all of its losses and finished positive by the time US equity markets closed. Italian equities, as represented by the FTSEMIB (INDEXBIT:FTSEMIB), was the best performing group in Europe today, followed by France and Spain. European sovereign bonds also performed very strongly. The Italian 5-year bond yield fell by 12.4 basis points to 1.59%, below similar maturity US Treasuries.

US equities weren't left out from the global risk rally. The S&P 500 (INDEXSP:.INX) got off to a slow start, but ended up higher by 0.65%.  All 10 basic sectors of the S&P 500 gained on the day, led by industrials and financials. In the KBW Bank Index (INDEXSP:BKX), all 24 of its components increased. On a beta-adjusted basis, the small-cap Russell 2000 (INDEXRUSSELL:RUT) outperformed by 0.8%, and tech stocks saw similar gains.

Tomorrow's Financial Outlook

There is another significant event for global markets this week: the US May nonfarm payrolls, which will be reported tomorrow morning at 8:30 a.m. EDT. Economists expect a net increase of 215,000 payrolls after an increase of 288,000 last month. Due to the severe drop in the participation rate, they expect unemployment to increase to 6.4% from 6.3% in April. Although this past Wednesday's private payrolls report showed disappointing labor activity in May, market participants expect the government figure tomorrow to exceed expectations.

Outside of the US, Germany will report its April trade balance and industrial production. Also, Canada will report its May employment report at the same time as the US.

There are no major earnings reports scheduled.


Twitter: @Minyanville

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

More From Minyanville Staff
Markets See Global Risk Rally on Negative ECB Rates
Today's financial recap and tomorrow's financial outlook.
Minyanville Staff    

The event the market had been waiting for finally arrived: the ECB's rate decision, and it was one for the history books. The central bank lowered its deposit rate by 10bps to -0.1%, main refinancing rate to 0.15%, and marginal lending rate by 30bps to 0.4%. In addition, the ECB announced that it would cease sterilizing its existing Securities Market Programme (SMP) bond holdings, make targeted very long-term loans to banks, and lay the groundwork for future purchases of asset-backed securities. The last point was viewed by market participants as the preliminary step before the central bank would begin broader asset purchases. The move by the ECB to negative deposit rates is unprecedented for a developed market central bank.

Effectively, Mario Draghi pushed a big portion of his chips into the middle of the table to combat deflationary forces in the eurozone by increasing the supply of available credit.

Risk assets responded accordingly, although the euro / US dollar cross recovered all of its losses and finished positive by the time US equity markets closed. Italian equities, as represented by the FTSEMIB (INDEXBIT:FTSEMIB), was the best performing group in Europe today, followed by France and Spain. European sovereign bonds also performed very strongly. The Italian 5-year bond yield fell by 12.4 basis points to 1.59%, below similar maturity US Treasuries.

US equities weren't left out from the global risk rally. The S&P 500 (INDEXSP:.INX) got off to a slow start, but ended up higher by 0.65%.  All 10 basic sectors of the S&P 500 gained on the day, led by industrials and financials. In the KBW Bank Index (INDEXSP:BKX), all 24 of its components increased. On a beta-adjusted basis, the small-cap Russell 2000 (INDEXRUSSELL:RUT) outperformed by 0.8%, and tech stocks saw similar gains.

Tomorrow's Financial Outlook

There is another significant event for global markets this week: the US May nonfarm payrolls, which will be reported tomorrow morning at 8:30 a.m. EDT. Economists expect a net increase of 215,000 payrolls after an increase of 288,000 last month. Due to the severe drop in the participation rate, they expect unemployment to increase to 6.4% from 6.3% in April. Although this past Wednesday's private payrolls report showed disappointing labor activity in May, market participants expect the government figure tomorrow to exceed expectations.

Outside of the US, Germany will report its April trade balance and industrial production. Also, Canada will report its May employment report at the same time as the US.

There are no major earnings reports scheduled.


Twitter: @Minyanville

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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