© Reuters. FILE PHOTO: The German Stock Index DAX Chart on the Frankfurt Stock Exchange
By Thyagaraju Adinarayan
LONDON (Reuters) – The Euro Strikes and German Bond Yields Hit a New Record Low on Tuesday Comments by Central Bank President Mario Draghi suggest the possibility of new interest rate cuts or asset purchases.
Draghi said the ECB needs to ease policy again if inflation does not return to its targets and there is still "considerable room to maneuver". To do that. Eurozone inflation fell to 1
German government bond yields, the benchmark for Europe, fell for the first time to -0.30% and the euro fell to a two-week low against the dollar, while European equities shook off weaknesses early on in order to trade 0.9% higher ,
"Market sentiment has increasingly struck us as market shifts expand as central bank leaders confirm expectations, as did trading This happened when the Fed confirmed its reluctance earlier this year," said Fiotakis, Themos Head of FX and Interest Strategy at UBS.
(Graph: Draghi sends Bund yield to new record low – https://tmsnrt.rs/2XXH7Rc)
Draghi, nicknamed "Super Mario," is expected to finish his eight-year term this year, without ever raising interest rates to have completed.
ECB signals came a day before a widely anticipated US Federal Reserve decision, where expectations of Draghi's opponent were high Jerome Powell would likely lay the groundwork for a rate cut later this year.
"In just a few months, the market has changed from a Fed-led to an active Fed leadership," said Bank of America Merrill Lynch (NYSE 🙂 interest rate strategist.
The US Federal Reserve is expected to keep borrowing costs unchanged, but markets are almost completely discounting a rate cut of 25 basis points for July.
The meeting will also provide the most direct insight into how deeply affected the policy makers have been by the US-China trade war. [FED/DIARY]
Interest rate cuts, fueled by Draghi's restrained speech, let the US Treasury yield fall to its lowest level since September 2017. Fund manager survey revealed. For the first time, Treasuries were the "most crowded" business in their survey.
(Graph: US interest rates – https://tmsnrt.rs/2Iogak7)
The impact of US export restrictions on China are already being felt in Europe for sales and profitability.
The warning has affected European technology stocks, but a sharp reversal in the euro and interest rate cuts compensated for the weakness, which increased the pan-European STOXX index by 0.9% from 1031 GMT.
In a further blow against the German economy, which is expected to increase by only 0.5% in 2019, the mood among German investors in June, according to recent weak economic data and the escalating trade conflict between drastically deteriorated in the US and China.
Asia, the broadest MSCI index for Asia-Pacific equities outside Japan, gained 0.6% while the Japanese index declined 0.7%. The MSCI share rose 0.15% globally, supported by Europe.
"Markets have been very subdued in recent sessions, trading mostly sideways … A drop in the price of oil and a rise in the gold price are also a threatening sign," said John Woolfitt on the Atlantic markets.
Worries over global growth eased another 0.8% on Tuesday, although losses were limited by tensions in the Middle East following last week's tanker attacks. [O/R]
Acting US Secretary of Defense Patrick Shanahan announced Monday that he would deploy another 1,000 troops in the Middle East, which he believes should be used for defense purposes. The Australian dollar fell to a new five-month low of 0 , 6830 USD after decision-makers at the Reserve Bank of Australia meeting in June said it may need to ease back to put pressure on reducing unemployment and reviving wages and inflation.
The central bank cut interest rates to a record low of 1.25% earlier this month to shore up the weakening economy, waiting for news of competition for leadership of the ruling conservative party.
"The fact that Boris Johnson will most likely become the new prime minister hangs like a sword of Damocles over the tendency of the poun d. Against this backdrop, investors are currently reluctant to trust the currency too much," said Marc-André Fongern, strategist at MAF Global Forex in Frankfurt on Tuesday, as emerging currencies strengthened against the dollar as cautious optimism entered the markets before the Fed meeting.