European Shares Seen Up After Fed Move
European stocks are seen opening higher on Tuesday after the Federal Reserve announced it will begin buying corporate bonds to support small and medium-sized businesses that have fallen on hard times as a result of the Covid-19 pandemic.
Asian stocks rallied despite China reporting another 27 domestically transmitted coronavirus cases in Beijing. The World Health Organisation said the new cluster was a cause for concern, given Beijing’s size and connectivity.
The Bank of Japan kept its monetary settings steady today, saying the economy will gradually recover from the coronavirus pandemic.
In the Reserve Bank of Australia’s minutes of its June monetary policy meeting released earlier today, the central bank said it was possible that the downturn would be shallower than earlier expected.
The Bloomberg reported that the Trump administration is in the process of preparing a $1 trillion infrastructure proposal.
Morgan Stanley economists said that they have greater confidence in their call for a V-shaped recovery, given recent upside surprises in growth data and policy action.
U.S. Treasury yields rebounded and gold held steady on dollar weakness, while oil prices were little changed after the energy minister of the United Arab Emirates voiced confidence that OPEC+ countries would meet their commitments to cut output.
Unemployment data from the U.K. and economic confidence figures from Germany are due later in the session, headlining a light day for the European economic news.
Across the Atlantic, trading may be impacted by reaction to reports on retail sales, industrial production and homebuilder confidence. Traders are also likely to keep an eye on Fed Chair Jerome Powell’s testimony before the Senate Banking Committee.
U.S. stocks rose overnight as a measure of regional manufacturing activity stabilized unexpectedly in June and the Federal Reserve announced it will begin purchases of individual corporate bonds to support market liquidity and the availability of credit for large employers.
The Dow Jones Industrial Average gained 0.6 percent, the tech-heavy Nasdaq Composite surged 1.4 percent and the S&P 500 added 0.8 percent.
European markets closed Monday’s session lower after reports showed spikes in new coronavirus cases in the U.S., China and Japan.
Markets, however, ended off their day’s lows after Britain and the EU greed on plans to intensify Brexit negotiations in July.
The pan European Stoxx 600 eased 0.3 percent. The German DAX dropped 0.3 percent, France’s CAC 40 index shed half a percent and the U.K.’s FTSE 100 gave up 0.7 percent.
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