The major European indices are closing higher and in the process reversed earlier session lows. Provisional closes are showing:
German DAX, +1.5%. The low extended to -0.87%
France’s CAC +0.9%. The low extended to -1.39%
UK’s FTSE, +1.2%. The low extended to -0.68%
Spain’s Ibex, +1.2%. The low extended to -1.66%
Italy’s FTSE MIB, +1.1%. The low extended to -2.11%
In the European debt market, the benchmark 10 year yields are ending the session lower. The biggest decline are was France at -1.7%. It moved above the 0.0% level at the highs today (high yield reached 0.002%). Buyers came in and pushed yield down into the close (trading at -0.033%).
In the UK today, the treasurysold £3.8bn of three-year gilts at a yield of -0.003%. That was the first sale below 0% in the UK as investors look for further declines in UK rates as the battle Brexit and coronavirus headwinds.
Bank of England’s governor Bailey said that the challenge for the central bank is getting inflation to return to target.
China is offering to completely remove the requirement for forced joint ventures by Jan 2020. The Chinese would like to see if further tariffs could be suspended or rolled back. We will see if that is enough for the US Trade Team
Just be wary that a large part of the gains seen here can be attributed to catch-up play to the performance of US equities overnight. European equities closed in a mixed mood before the late surge in US stocks – led by tech – so that is helping to fuel some of the gains.
Other than that, Facebook beating forecast revenues in Q2 is also helping to lift sentiment further but it’s all about the ECB later on. Expectation that the central bank will ease today has heightened (OIS market sees odds of a 10 bps rate cut at ~51% now) and that should tells you how markets are feeling about the decision later on today.