US index futures posted some solid gains overnight, but some of that upside has been eroded early in the European session. Gains are still there, but if downside pressures are sustained across major European bourses then the picture could look somewhat different come the opening bell, and the ECB is in a position to play a major role here. Mario Draghi and his team are today widely expected to announce an end to the bond buying stimulus measures which have been propping up the Eurozone economy since the credit crisis a decade ago. More significant however will be any communication over the timing of the first rate hike. This had been tipped for Q3 2019, but lacklustre economic data has resulted in some suggestions that it could be pushed back. Such news would likely boost Euro stocks - and have the potential to lend some support on Wall Street, too.
Tonight’s US budget statement will also be worth watching. The deficit is tipped to grow, but anything much beyond the expected print of almost -$200 billion could rattle markets. Costly tax breaks have helped bolster equity valuations so any suggestion that the largesse may need to be toned done could increase downside pressures on equities.
Ahead of the open we’re calling the DOW up 73 at 24,600 and the S&P up 7 at 2,658.
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Soaring US yields trigger the wrecking ball effect as yields become a source of volatility for risk, rather than a source of support