Investors both overseas and in Europe may be wondering if now is the right time to make changes to relief asset purchase programs, or if it's still too early to do so as another autumn wave of pandemics may be looming.
Today, stocks in Europe appear to have fallen for a third straight session amid concerns about a global recovery from a pandemic and in anticipation of the European Central Bank meeting later in the day. Policymakers will present updated forecasts for growth and inflation. They will also discuss the future of the PEPP bond-buying program, with the pace of purchases likely to drop to as low as €60 billion a month from the current €80 billion, before falling further early next year and ending the program in March. Frankfurt's DAX 30 fell nearly 0.5 percent to 15550 points, its lowest level since July 27. The market may also be waiting for the press conference of the head of the ECB, who has previously said that the PEPP program will continue, just be modified.
In the foreign exchange market, on the other hand, we may see a multi-day strengthening of the USD. The dollar index was around 92.7 on Thursday, close to levels not seen in almost 2 weeks, amid cautious risk sentiment and falling stock prices. Concerns about the spread of the delta virus and its impact on the economic recovery persist, and investors are waiting for more clues from central banks as they begin to taper stimulus. Dallas CEO Robert Kaplan said that based on the current outlook, he would support a September announcement of tapering bond purchases and a possible start in October. Bank of New York President John Williams, on the other hand, said that starting tapering before the end of the year could be appropriate.
Meanwhile, on the crude oil market we could observe further stabilization of the price in the USD 70 area. Attention seems to be drawn by shrinking inventories and problems with supply. According to the API institute, in the week ended September 3 crude oil inventories in the USA decreased by 2.882 million barrels, which is the sixth consecutive week of decreases, although less than the market expectations of a decrease by 3.832 million. At the same time, more than 75 percent of offshore oil rigs in the U.S. and Mexico remain closed after infrastructure damage caused by Hurricane Ida. It should be mentioned, however, that while oil prices are stabilizing, natural gas prices are rising rapidly. This may be fostered by both the drought in the US, where gas-fired power plants are in operation instead of hydroelectric plants, the export of gas from the US to the world, where it is much more expensive, and the decline in stocks before winter.
Daniel Kostecki, chief analyst at Conotoxia Ltd. (Forex service of Cinkciarz.pl)
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