CURRENCY MARKET WRAP
As of Fri, Jun 7th, Singapore Time zone UTC+8
Dollar Index -0.34%, 96.99
USDJPY, +0.10%, $108.43
EURUSD, +0.44%, $1.1278
GBPUSD, +0.06%, $1.2695
USDCAD, -0.48%, $1.3357
AUDUSD, +0.11%, $0.6978
NZDUSD, -0.07%, $0.6621
In trade, according to sources from Bloomberg News, Mexico asked for more time to reach a deal needed to avert the tariffs that are planned to go into effect on Monday. Although the report noted the tariffs may still go into effect, one official said Mexico’s seriousness in talks may prove the tariffs to be short-lived. Negotiations will continue at 5:30 p.m. ET, according to CNBC.
ECB’s governing council left the benchmark main refinancing rate at 0% (expected) and the deposit rate at minus -0.4%. In a move supported unanimously by the 25-member council, the bank strengthened its message on borrowing costs, saying it now expected to keep both interest rates on hold “at least through the first half of 2020”. It had previously said it expected rates to stay on hold “at least until the end of 2019”. The bank was ready to “use all the instruments that are in the toolbox” if the slowdown in the bloc’s export-driven manufacturing sector began to infect other parts of the economy, the ECB president said at a press conference after the bank’s policy meeting, adding that “the policy space is there” for any necessary measures. He specifically mentioned a fresh expansion of the bank’s €2.6tn quantitative easing programme and rate cuts as possibilities, but insisted that the central bank’s efforts would need to be matched by a boost in public spending by the region’s governments.Draghi said ECB economists downgraded their outlook for growth and inflation next year. The euro-zone economy is now seen expanding 1.4% in 2020 compared with a March forecast for 1.6%. Inflation is seen at 1.3% this year, 1.4% next year and 1.6% in 2021, well below target.
In all Draghi failed to deliver a “big bang” announcement, instead extending the lower for longer period until the first half of 2020, as was already priced in by the market, and unveiling less generous TLTRO III terms that left much to be desired. Euro traded to a high of 1.1308, before reversing to close the day at 1.1278.
Shorter-dated U.S. Treasuries backtracked from yesterday’s advance, pushing the 2-yr yield up five basis points to 1.89%. The 10-yr yield finished unchanged at 2.12% for the second straight day.
STOCK MARKET WRAP
S&P500, +0.61%, 2,843.49
Nasdaq, +0.78%, 7,275.93
Nikkei Futures, +0.76%, 20,888.0
The stock market extended its rally to a third consecutive day on Thursday, boosted by news that the U.S. may delay the proposed 5% tariff rate on all imports from Mexico. A turnaround in oil prices ($52.64, +$0.98, +1.9%) padded the rebound in the energy sector (+1.7%), semiconductor stocks boosted the information technology sector (+1.1%), and the trade-sensitive materials sector (+1.1%) also outperformed. The Philadelphia Semiconductor Index advanced 1.3%.
In corporate news, shares of Advanced Micro Devices (AMD 31.82, +2.32) surged 7.9% after the stock was upgraded to Equal-Weight from Underweight at Morgan Stanley. Fiat Chrysler (FCAU 13.30, +0.11, +0.8%) withdrew its merger proposal to Renault (RNSDF) due to unfavorable political conditions in France.