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Markets roar on stimulus and trade

Markets roar on stimulus and trade

Asset prices rose around the globe rose in overnight trading. Two key factors drove the gains. Speaking at a conference in Portugal, ECB head Mario Draghi promised more stimulus if inflation remains too low, sending European bonds and stocks soaring. American investors joined the party after US President Trump announced an extended meeting with China’s President Xi at the G-20 meeting later this month, raising hopes of a resolution to the trade dispute.

Currency traders showed restraint in their selling of the Euro, but industrial commodity markets responded with enthusiasm. Crude oil contracts lifted by 2%, and iron ore futures smashed through 800 yuan in a 5%+ rally. Copper, aluminium, nickel and steel markets all rose.

The prospects of a better growth outlook as trade relations improve combined with a backstop from the ECB forced underweight investors back into the market. The sudden shift in markets means tomorrow morning’s US Federal Reserve announcement has even higher potential to influence trading. Anything less than a clear signal of a July interest rate reduction could see a sudden reversal in market action.

Asia Pacific share markets are looking at opening gains. Regional currencies are firmer, excepting the safe haven Yen. The New Zealand dollar is in focus after data this morning showed the balance of payments bouncing back into the black in the first quarter of 2019.

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