As trade war fears ease (again) following news late on Wednesday that the White House would consider tariff “carve outs” for Canada and Mexico, markets are modestly higher ahead of a fresh monetary policy catalyst from the ECB this morning. Mario Draghi will be the center of attention today as investors wait to see whether there will be any moves toward an exit from stimulus measures amid the threat of a potential trade war. That said, the ECB is unlikely to make major changes to guidance at today’s meeting as inflation remains far below a target of just under 2%, even with stronger economic growth.
Meanwhile, European stocks drift higher, led by technology shares following strong gains in Asia. Nasdaq futures climb steadily toward session highs, mirroring those gains, while the S&P has also found a bid in recent bid.
The European cash open mimicked the lead seen on Wall St. and overnight in Asia, with major bourses recouping prior losses (Eurostoxx 50 +0.2%) with the exception of the DAX 30 (-0.2%) which sees Merck (-3.0%) at the bottom of the index after the release of its earnings this morning. Material and Energy names are the session laggards, with BHP Billiton (-3.9%), Anglo American (-2.0%) underperforming in the FTSE and Arcelormittal (-1.0%) in the CAC. Elsewhere, the Telecom sector (+1.0%) outperformance has been supported by phone operators Vodafone (+1.3%), Orange (+0.54%) and DT Telekom (+0.7%).
The strong European open followed another green session out of Asia, with Australia’s ASX 200 (+0.7%) and Nikkei 225 (+0.5%) higher with sentiment also underpinned by economic releases including encouraging trade figures in Australia and stronger than expected Japanese Final Q4 GDP. Elsewhere, Hang Seng (+1.5%) outperformed and Shanghai Comp. (+0.7%) initially lagged after the PBoC refrained from liquidity operations, before better than expected Chinese trade data provided some inspiration.
Bunds retrace some of yesterday’s advance as underperformance in the belly of the curve leads to bear flattening in the 5s30s; Italy outperforms with the rest of the periphery amid speculation of a coalition between euroskeptic and center-left parties.