The relentless risk levitation continued overnight, as global shares extended their stretch of consecutive record highs on Thursday for a 10th day after a cautious BOJ lifted Asian stocks to a decade high with a dovish announcement that offered no surprises, while pushing back Kuroda's 2% inflation target to 2020, the 6th consecutive delay. With all eyes on the ECB in just over an hour, US equity futures are in the green, following solid gains around the globe. European stocks extended their biggest gain in a week while Asian equities maintained their rally. Microsoft, Blackstone, Philip Morris and Ebay are among companies reporting earnings. Initial jobless claims data due.
Traders, so mostly algos, are riding a global risk "high" in stocks as Asia's and then Europe's early 0.4 percent gains ensured MSCI's 47-country All World index was up for a 10th straight session. This is the longest winning streak in global stocks since February 2015 and shows little sign of fatigue even as bond yields edged modestly higher again. The Stoxx Europe 600 Index rose 0.3 percent as of 9:53 a.m. in London. The U.K.’s FTSE 100 Index rose 0.5 percent to near the highest in a month. The MSCI Emerging Market Index fell 0.1 percent, the first retreat in almost two weeks. The VIX index closed below 10 for a record fifth consecutive day. Appropriately, Bloomberg dubbed the move a "no-vol" nirvana, in which stocks and bonds keep rallying as volatility evaporates...
The overnight focus was on the Japanese central bank's decision to push back its ambitious inflation target again, sending the yean weaker to 112.4 per dollar. Attention now shifts to whether ECB head Mario Draghi will give a hint later that it plans to wind down its 60 billion-euro-a-month stimulus program. As previewed earlier, the most likely outcome is that Draghi will follow in Kuroda's footsteps and not rock the boat. The risk, if any, is that Draghi does not come out sounding hawkish enough, which could prompt a big drop in the Euro which has been soaring in recent weeks on expectations the ECB will begin tightening policy soon.
"They are going to try and not upset markets," said Nick Gartside, international Chief Investment Officer of fixed income at JP Morgan Asset Management. "I think the real action is going to be the September meeting. That is when we probably get a little bit of news on tapering."
A cheat sheet of what to expect from the ECB is below...
The euro is up almost 10% so far this year but and was a shade lower at $1.1507 ahead of Draghi's post-meeting news conference, having hit a 14-month high of $1.1583 on Tuesday.
"It may be as we approach "1.20, which is realistic let's be honest, that it generates a little more alarm for the ECB," Gartside added.
European bourses followed markets from Tokyo to Sydney higher, and the MSCI All-Country World Index traded at a record high. With the Bank of Japan delaying the time-frame for reaching its inflation target, a sign its stimulus is in place for a while to come, attention turns to the European Central Bank’s meeting for clues on policy paths. Oil held onto gains as stockpiles decreased. The U.S. dollar strengthened for a second day after hitting a 10-month low Tuesday, though it was still down for the week.
# After the BOJ failed to inspire any volatility, traders are now left with Mario Draghi who speaks at 8:30am ET. Like the BOJ, the ECB is forecast to keep policy on hold Thursday. A report that the bank has been examining options for asset purchases does add to speculation that Mario Draghi will concede time is approaching to adjust the bond-buying program as the economic recovery expands.
In global macro, the Yen was weaker after the BOJ failed to deliver even a trace of hawkishness, sending the Nikkei 0.6% higher. The Aussie dollar slipped on profit taking after initially nearing 80 cents on solid jobs data; The Yuan weakened against the dollar for a second day after the PBOC added a net 60 billion yuan in repos on top of reported liquidity injection via banks on Wednesday. Dalian iron ore futures flat.
Elsewhere in currencies, the euro fell 0.1 percent to $1.1506, still close to a 14 month high. The British pound fell 0.1 percent to $1.3005, the weakest in a week. The Bloomberg Dollar Spot Index climbed 0.3 percent, the biggest increase in more than two weeks. The Japanese yen sank 0.3 percent to 112.34 per dollar, the largest decrease in almost two weeks.
In commodities, gold sank 0.3 percent to $1,238.03 an ounce, the largest decrease in almost two weeks. WTI crude fell less than 0.05% to $47.11 a barrel.
The Bloomberg Commodity Index decreased 0.1%, the largest fall in a week.
In rates, the yield on 10-year Treasuries fell less than one basis point to 2.27 percent. Germany’s 10-year yield rose one basis point to 0.55 percent, the first advance in a week. Britain’s 10-year yield rose two basis points to 1.212 percent. Southern European government bonds underperformed better-rated peers having closed the gap with Germany to the tightest level in months in recent days. Italian, Portuguese and Spanish government bonds are seen as the biggest beneficiaries of the central bank's ultra-loose monetary policy stance of the past few years, and some worry that the market is not fully reflecting the increased risk these countries now face if the ECB moves towards tighter policy. "We have seen very little impact on peripheral spreads since Sintra but this could change very rapidly in a short period of time if the messaging is a bit too hawkish today," said DZ Bank strategist Daniel Lenz.
# Market Snapshot;
- S&P 500 futures up 0.1% to 2,473.50
- STOXX Europe 600 up 0.4% to 386.88
- Nikkei up 0.6% to 20,144.59
- Hang Seng Index up 0.3% to 26,740.21
- Shanghai Composite up 0.4% to 3,244.87
- Euro down 0.1% to 1.1504 per US$
- Brent Futures down 0.1% to $49.64/bbl
- Gold spot down 0.3% to $1,238.00
- U.S. Dollar Index up 0.2% to 94.98
*) Top News;
- BOJ keeps stimulus unchanged; pushes back 2% inflation goal timing to fiscal 2019; raises assessment of economy to ’expanding moderately’
- Draghi Moves On From Sintra as ECB Refines Stimulus Message
- BofA Said to Halt Transactions With HNA Amid Debt Concerns
- McCain Diagnosed With Brain Cancer After Procedure for Clot
- South Africa Regulator Seeks Further Information on DuPont, Dow
- Goldman Partners Mark End of Era as Stock Holding Drops Below 5%
- Blackstone Is Said to Raise $3b in First Asia PE Fund: Reuters
- Japan June trade balance 439.9b yen vs 488.0b yen estimate
- Australia June jobs 14k vs 15k est; unemployment rate 5.6% vs 5.6% est; full-time jobs 62k; participation rate 65.0% vs 54.9% est
- China, U.S. agree on cooperation to cut trade deficit: Ministry
- PBOC said to have injected liquidity via some banks on Wednesday
- German June tax revenue down 6.5% on repayments, ’lively’ 2Q upswing
- Deutsche Bank Expects DOJ Subpoenas Over Russia Probe: Guardian
*) Asia equity markets carried over the momentum from the US, where all three majors closed in the green with the energy sector outperforming on the back of a larger than expected draw in DoE crude oil inventories. ASX 200 (+0.6%) outperformed on the back of the upside seen in oil markets, as well as a strong performance from Financial names, while Nikkei 225 (+0.6%) benefitted from a softening JPY, although the currency breaking above the 112.00 handle. Elsewhere, Shanghai Comp. (+0.25%) and Hang Seng (+0.2%) conformed to the upbeat tone, with the former lagged following a lacklustre CNY 60b1n liquidity injection by the PBoC. Finally, 10yr JGBs traded lower amid the global risk-on conditions, with underperformance in the long end leading to steepening of the yield curve.
# Top Asian News;
- BOJ Keeps Easing Unchanged as It Pushes Back Inflation Goal
- Steel Rebar in Shanghai Tanks 5% From 2013 High as Buyers Wary
- Kuroda: People Won’t Lose Trust in BOJ Because Forecasts Missed
- Aussie Yield Retreats From Job-Data High Ahead of RBA Speech
- Global Steelmaker Recovery on Show as Posco’s Profit Jumps
- Yaskawa Electric Raises Forecasts After 1Q Profit Beat
- Foreign Insurers Are Said to Plan $2 Billion of Malaysia Deals
- Kuroda: Current Monetary Policy Is Sustainable, Flexible
*) European bourses trade in the green, as earnings continue to dictate play. A dovish BoJ has helped with the flow in equities, however full focus does remain on the ECB. 9/10 Stoxx 600 sectors trade in the green, with utilities in the red, evident of the risk on tone. The FTSE was also unfazed by the stela UK Retail Sales beat. Fixed Income markets do trade subdued however, with many arguing that the risk is to the downside for Gilts. Gilts were in focus as we approached the latest UK data, Retail Sales, beat on all accounts, however, could not spark any selling into Gilts, as Draghi approaches
# Top European News;
- France Says ‘We Want Our Money Back’ as Brexit Talks Wrap Up
- Danske Bank CFO Says Writebacks Can’t Continue in Normal Cycle
- London’s Super-Prime Housing Slump Spreads to Luxury Properties
- EasyJet Falls; ‘Good News, But Not Good Enough’: Analysts
- Sports Direct Ends Four-Year CFO Wait as Ashley Plugs Key Gap
- SAP Lifts Sales Outlook, Buying Back Stock on Cloud Growth
- Zooplus Drops; Kepler Says Weak 2Q, Investment Case Unchanged
# In currencies, FX markets have been subdued since the open, as much of the volatility was seen from JPY and AUD overnight. European FX traders did await the UK Retail sales beating across the board, aiding cable in retaking the 1.30 handle. EUR/GBP saw a dip lower; however, closer attention will be on the ECB later this afternoon. GBP has not seen all bullish news this morning, with comments from Fox stating that the UK can still survive with no Brexit deal, once again intruding the possibility of a 'hard brexit.'
# In commodities, precious metals trade lower, evident of the risk tone that has been seen in recent trade, as Gold, Silver and Platinum all trade in the red. Elsewhere, Oil trades subdued following the unexpected draw yesterday, yet has contained around yesterday's high, with WTI firmly above 47.00/bbl.
# Looking at the day ahead, the ECB rate decision and Draghi press conference around lunchtime will be the key focus. In the US, initial jobless claims numbers (est: 245K) and the Philadelphia Fed Business survey will be out. US earnings seasons remains a focus, with Microsoft, eBay, Visa, American Airlines, Alliance Data systems, PPG Industries and Philip Morris schedule to report....