US stocks fought back Tuesday, rebounding from yesterday’s pullback as investors grew positive ahead of a German constitutional court ruling on the EU-wide bailout fund while speculations grew the US Fed will announce further stimulus after its two-day FOMC meeting starting tomorrow.
Treasuries retreated, pushing yields higher even though US auction for $32 billion of three-year notes drew record demand. Ratings agency Moody’s Investor Services had warned hours earlier it would cut US credit rating if the country failed to improve its debt-to-GDP ratio in next year’s budget negotiations.
European stocks rallied in late trade as risk appetite improved ahead of the US Fed’s two-day FOMC meeting starting tomorrow. The pan-European Stoxx Europe 600 index added 0.3 percent after trading in the negative territory for most of the day.
In Germany, the DAX 30 index climbed 1.3 percent, driven by gains in the banking and utility sector. The French CAC 40 index tracked 0.9 percent higher, pushed by largely by banks and drugmaker Sanofi.
Elsewhere, major Europe-linked ETFs, particularly those related to the most indebted nations, rallied to new highs Tuesday ahead of market-moving events this week.
The Global X FTSE Greece 20 ETF (GREK) surged 4.18 percent to hit a five-month high following media reports the country may secure more flexibility to meet its austerity targets.
Prime Minister Antonis Samaras met ECB President Mario Draghi and other officials today at the bank’s headquarters in Frankfurt to apprise the ECB on Athens’ efforts to meet its bailout terms.
The iShares MSCI Italy Index fund (EWI) rose 2.23 percent while the iShares MSCI Italy Index fund (EWP) climbed 2.15 percent. The iShares MSCI Poland Investable Market Index Fund (EPOL) surged 3.12 percent, as the emerging Europe fund stands to benefit from coordinated US, Europe and China central bank intervention.
Let’s see if the German High court agrees tomorrow to the terms of the ESM. Consensus is that they will but with certain restrictions, which may affect the timely implementation of this mechanism.
Disclosure: No holdingsContact Ulli