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Stocks higher today following ECB expansion of its bond buying program

Stocks higher today following ECB expansion of its bond buying program 981 980 Realm

UK and European stocks are higher today after the European Central Bank announced a larger-than-expected expansion of its pandemic emergency purchase program. Markets are now looking to the latest U.S. jobs report later today.

 

Global Macro

  • The European Central Bank expanded its pandemic emergency purchase program by €600 billion to a total of €1.35 trillion during its June meeting, more than an expected €500 billion increase, and extended it to at least June 2021. Policymakers also said that PEPP proceeds will be reinvested at least until end-2022. The latest move aims to help mitigate the negative impact of the coronavirus crisis and to create fiscal room for governments to support their economies. Still, investors were hoping that the central bank would announce an expansion of its bond buying program to include junk-rated bonds. The rate on the ECB’s Main Refinancing Operations, which banks can tap to obtain one-week credit from the central bank, was left at 0% while the rate on overnight liquidity was fixed at 0.25%. The bank’s Deposit Facility Rate was left at -0.5%.
  • New Imports to the US sank 13.7% to $200.7 billion in April of 2020, the lowest reading since July of 2010 due to the coronavirus lockdown and other restrictions imposed. Decreases were mainly seen in purchases of automotive vehicles, parts, and engines ($-14.6 billion) namely passenger cars ($-6.9 billion), automotive parts and accessories ($ 4.1 billion), trucks, buses, and special purpose vehicles ($-2.3 billion). Imports from China increased $11.0 billion to $35.2 billion while those from Mexico fell $12.6 billion to $15.8 billion.
  • Exports from the US plunged 20.5% to $151.3 billion in April of 2020, the lowest since April of 2010 after the coronavirus pandemic led to business closures and restricted the movement of travelers across borders. Sales fell for capital goods ($-10.1 billion), namely civilian aircraft engines ($-2.2 billion), civilian aircraft ($-2.1 billion) and other industrial machinery ($-1.0 billion); industrial supplies and materials ($-9.1 billion). Exports of services went down $6.7 billion to $55.8 billion, due to travel ($-3.4 billion) and transport ($-2.3 billion). Sales to China increased $2.1 billion to $9.3 billion while those to Mexico went down $7.0 billion to $12.4 billion.
  • On Thursday: European stocks fell slightly on profit taking after three days of strong gains on optimism around reopening and hopes of economic recovery. US stocks turned in a relatively lackluster performance during trading before eventually ending the day mixed. Asian stocks rose broadly as social unrest across the U.S. showed signs of calming and the ADP’s U.S. private sector jobs report showed employers cut fewer jobs than expected in May.
  • Thursday’s data below:

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