Global Equities Climb On The Hopes Of ECB Stimulus

Anticipation ahead of today’s monetary policy announcement from the European Central Bank contributed to the higher close on US markets, with the bank expected to unveil additional stimulus. The majority of the European markets ended Wednesday’s session with modest gains, extending their winning streak to a fifth consecutive session on hopes for ECB Stimulus. Asian markets are trading higher today as investors bet on the likely size and scope of European Central Bank’s bond-buying program in an attempt to revive the flagging euro zone economy.

The US Dollar traded lower by 0.2 percent yesterday after the release of mixed U.S. housing reports, although the greenback still continued to trade near recent 12-year highs. However, sharp losses were cushioned as investors turned their attention to the European Central Bank’s upcoming policy meeting on Thursday. The currency touched an intraday low of 92.36 and closed at 93.14 on Wednesday.

Markets have been waiting a long time for today’s European Central Bank announcement on quantitative easing. The German stock market index will be keenly watched, in part because it’s such a liquid market. QE certainly has the potential to support stock market valuations In addition; the weakening euro will help German exporters who will at the same time benefit from cheaper commodity input prices. Confirmation of a big QE plan certainly has potential to bring cheer to the German stock market. However, that doesn’t look like a guaranteed outcome and, interestingly, the decision comes at a time when the DAX is parked at significant chart resistance.

Eurozone stocks have been boosted by reports that the European Central Bank may launch a bigger stimulus program than expected, while British equities have moved higher on falling unemployment. Frankfurt’s DAX 30 index rose 0.4 per cent to a new record close of 10,299.23 points, while in Paris the CAC 40 climbed 0.9 per cent to 4,484.82 points. Milan jumped 1.6 per cent and Madrid added 0.5 per cent. The FTSE 100 of top companies shot up 1.6 per cent to 6,728.04 points, lifted by news that British unemployment has struck another six-year low and expectations that a Bank of England rate hike is a long way off.

Wall Street is hoping for a huge stimulus package today. At the closing bell, the Dow rose 39 points, or 0.2 per cent, to 17,554.  The S&P 500 added 10 points, or 0.5 per cent, to 2,032 and the Nasdaq Composite Index gained 13 points, or 0.3 per cent, to 4,667. US stocks advanced at the close of trade after reports suggested the European Central Bank was set to deliver a bond-buying program that matched investors’ expectations.  A proposal from the ECB’s executive board calls for bond purchases of about €50 billion a month that would last for a minimum of one year, The Wall Street Journal reported.

Loose monetary policy has helped drive gains in Wall Street equities in recent years. Even as the Federal Reserve remains on track to raise interest rates this year, efforts from other major central banks, including the ECB, are likely to keep global interest rates low.