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European stock index futures bounce on Fed's bond buying plan

Published 16/06/2020, 07:18
Updated 16/06/2020, 07:40
© Reuters. The German share price index DAX graph is pictured at the stock exchange in Frankfurt

© Reuters. The German share price index DAX graph is pictured at the stock exchange in Frankfurt

(Reuters) - European stock index futures joined a global rally on Tuesday, ahead of the U.S. Federal Reserve's plan to kick off its corporate bond buying programme in an attempt to contain the economic damage from the COVID-19 pandemic.

The Fed is set to start purchasing corporate bonds on Tuesday through the secondary market corporate credit facility (SMCCF), one of several emergency facilities recently launched by the U.S. central bank to shore up liquidity.

Euro Stoxx 50 futures (STXEc1) surged 2.7%, recovering from a slump in the past week that was fuelled by concerns of another wave of global coronavirus infections. German DAX futures (FDXc1) were up 2.8%, while FTSE 100 futures (FFIc1) gained 2.3%.

S&P 500 futures also added 1.3%, looking set to extend gains for the benchmark S&P 500 index (SPX) for a third straight day.

"With second wave fears diverted, investors are having visions of the economy returning to pre-pandemic (levels) and are revelling in the incomprehensibly-large global stimulus that will eventually find its way into every liquid asset imaginable," said Stephen Innes, markets strategist at AxiCorp.

Historic monetary and fiscal stimulus has partly powered a rebound in European equity markets since a coronavirus-fuelled crash in March, with the pan-European STOXX 600 index (STOXX) now only about 18% below its February record high.

Earlier in June, the European Central Bank surprised financial markets by increasing the size of its own emergency bond buying by 600 billion euros ($680 billion) and saying the purchases would run six months longer than originally planned.

Still, the pace of the rally has slowed with mounting evidence of the corporate hit from sweeping lockdowns imposed to contain the spread of the respiratory disease. European travel (SXTP) and banking (SX7P) stocks, two of the worst hit sectors during the health crisis, remain more than 34% down on the year.

© Reuters. The German share price index DAX graph is pictured at the stock exchange in Frankfurt

German airline operator Lufthansa (DE:LHAG) said late on Monday it was seeking to strike agreements with worker representatives by June 22 on how to make cuts equivalent to 22,000 full-time positions.

Latest comments

Freakin bullish run started lol
There seems to be exaggurated reactions for every but of importamt news. Bond buying by the fed wouldn’t prevent further economic damage from a second wave, yet peoples outlooks change completely with the news. Very unpredictable times.
I agree. It seems there is collusion between the big market players and some media. A 48 rise in new cases in China and the media suggest it's a 2nd wave, and world stock markets plunge, DOW collapsed 1800 points. Yesterday, the fed announced its bond buying program and the DOW recovered from its 400 point loss due to 2nd wave fears to a 200 point gain because the media suggest it's the best thing since sliced bread. It's got nothing to do with the economy, the market is going nowhere. It's just what can we say to make it go down, then what can we say to make it go up. Beware, tomorrow there's a good chance the market manipulators will make it go down again.
I dont think any news matters. Its one big casino and the big players are controlling all the cards.You just gave to try and not get caught.
open the the floodgates
Wow
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