US stocks are popping higher on earnings and after the ECB’s dovish hold signaled they are ready to use the whole toolbox in September. More QE and lower rates will help the eurozone and risky assets are getting a nice bump this morning. US earnings continue to come in mixed, but some of the larger cap beats are dominating the headlines. 3M and Facebook delivered strong results. So far roughly three out of four S&P 500 companies that have reported results have delivered strong earnings.
ECB
The ECB is ready to deliver rate cuts and launch QE2 and all options appear on the table for the September meeting. The initial reaction saw the euro spike higher on the dovish hold, but that did not last as the groundwork was put in place for a strong dovish signal for the upcoming meetings. The ECB decision went as expected, though some traders were disappointed they didn’t cut today. The tweaks to forward guidance that rates could go lower and the formation of committees to look at all the tool box options, including tiering, increasing its size, and widen composition of new asset purchases. The Draghi press conference is expected to be dovish, as we could see this be his last memorable presser. Draghi looks like he will continue on with his mantra from seven years ago that he will do whatever it takes to save the eurozone.
Oil
Oil prices are still benefiting from yesterday’s bullish EIA report, practically matching the API report we saw on Tuesday. The strong draw of nearly 11 million barrels mostly came from the Gulf of Mexico, which was dealing with the aftermath of Tropical Storm Barry. US production saw its biggest drop since October 2017, but it is expected to rebound strongly next week.
The demand part of the energy equation got another negative headlines as Germany’s business climate fell to the lowest level since February 2010. Further global economic data weakness may have limited effects on crude demand as the next round of easing from the ECB, along with the Fed’s shift to an easing cycle, will help the bolster the economy.
Gold
The ECB’s signal for fresh stimulus along with growing expectations the Fed is about to unleash a series of rate cuts is going to provide gold with solid demand for the rest of the year. Even if we see stocks continue to the climb into uncharted territory, the yellow metal seems ready to shine brighter.
Bitcoin
The largest cryptocurrency is testing the $10,000 level once again as investors see regulatory concerns start to fade. The regulatory environment will likely squeeze out the smaller digital coins first and we could see Bitcoin in medium-term.
