Equities Change Little Ahead Of ECB Meet; Six Major Events On Deck

Equities changed little Wednesday with the blue-chip S&P 500 index posting marginal gains as investors decided to wait in the wings ahead of ECB’s all-important policy meeting Thursday.

Meanwhile, Bloomberg reported the European Central bank is ready with its blueprint, called the “Money Outright Transactions,” to embark on an unlimited government bonds buying plan with maturities of three years or less while cutting money supply by the same-amount from the system elsewhere to maintain price stability.

After trading in a 77-point range, the Dow Jones Industrial Average (DJIA) settled 12 points higher while the S&P 500 Index (SPX) shed 1.5 points with utilities sinking the most and materials outperforming the index among its 10 business groups.

All eyes will be focused on six upcoming major events, which could cause the markets to sway in either direction in a big way.

MarketWatch puts it as follows:

If ever there were a week to end the sleepy calm of an uneventful summer in world markets, it is the one that’s about to hit us. The next six trading days are full of what traders call “event risk,” or what we journalists call “news.” That could break currencies and other markets out of their narrow trading ranges. It will be a week to make money — or to lose it.

The euro strengthened against the greenback Wednesday after media reports suggested the ECB’s Governing Council may approve distressed bond purchases from the secondary markets while sterilizing the effects on the euro-area common-currency by removing excess money supply from elsewhere.

The dollar-index, a barometer of the greenback’s strength versus a basket of six rivals, fell to 81.253 from 81.327 in late Tuesday trade. Draining of equivalent money reserve from the financial system, also known as sterilization is inline with the Bundesbank spirit of not flooding the system with newly printed money.

Meanwhile European stocks closed marginally higher on a volatile trading day ahead of Thursday’s ECB policy meeting. The euro-wide Stoxx Europe 600 index added 0.02 percent after wavering between losses and gains in a choppy session. The index had slipped into the negative territory after a revised eurozone PMI estimate suggested private-sector activity shrank more than previously estimated in August.

In the ETF space, the Barclays iPath Dow Jones-UBS Cocoa Total Return Sub-Index ETN (NIB) was one of the biggest percentage gainers, adding 3.6 percent on the day as Cocoa futures hit a 10-month high on supply worries.

The ongoing dry spell in the growing regions of West Africa and Southeast Asia may disrupt supplies further in future. The ProShares VIX Short-Term Futures ETF (VIXY) was among the biggest decliners, losing 2.71 percent on the day as the CBOE Volatility Index (VIX) tumbled 1.33 percent.

The iShares Dow Jones Transportation Average Index Fund (IYT) shed 1.04 percent after delivery company FedEx Corp slipped 2 percent Wednesday. Accounting for 9.51 percent of total assets, FedEx is IYT’s second biggest holding.

Disclosure: No holdings

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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