Stocks Consolidate Ahead of ECB as QE Tightening is Expected in the Autumn

European stock markets move sideways ahead of central bank decisions in Europe and Japan. The DAX has been swinging between gains and losses during the early AM European session, while the FTSE 100 was up slightly. The Stoxx Europe 600 also moved higher with Electrolux AB and ASML Holding NV advancing after earnings reports. Eurozone peripheral markets underperformed and the Spanish IBEX down amid reports that the ECB is discussion tapering options ahead of a decision in September. The Euro retreated, but that failed to give the DAX is a major lift as markets wait for Draghi’s comments tomorrow. Similarly, in Asia, the Nikkei underperformed with a mere 0.10% gain ahead of the BoJ and amid a broad move higher in other markets. The CSI 300 was up 1.71% at the close, Hang Seng and ASX 0.56% and 0.79% respectively as USD stabilized. U.S. stock futures are mixed, as investors continue to eye not just central bank decisions, but also U.S. politics.  Morgan Stanley reported financial results beating on the top and bottom line.

WTI crude futures are up 0.3% at $46.53, slightly off the intraday high at $46.64. Today’s range has so far remained within yesterday’s range, with the latest leads having been mixed. API data showed that while U.S. inventories of crude rose by 1.6 million barrels in the latest reporting week, gasoline stocks dove by an outsized 5.4 million barrels. New data out of Libya and Nigeria, meanwhile, is showing that supply from these countries continues to rise, with August loading schedules for the latter, for instance, rising to over 2 million barrels per day. Prices remain down by 13.4% on the year-to-date, up 3.5% on the year-on-year comparison, and down by 54.9% compared to prices three years ago.

The ECB Will Decide on QE in the Fall

The ECB will decide on QE in the fall according to reports.  The source story from Bloomberg suggests the analysis doesn’t mean a stimulus change is imminent, as the QE schedule has already been set out for the rest of the year. There haven’t been formal discussions on the future of the program and officials have limited appetite for any significant change in their policy language for now, as they agree that the ECB needs to move carefully, amid the risk of fresh taper tantrums. The central bank meets tomorrow and these issues should become clearer.