Asian stocks climbed on Tuesday, prolonging a 6 month high on the regional benchmark index, and allaying fears about a slowdown in the region’s economy. The MSCI Asia Pacific Index gained 0.5 perfect to hit 143.13 at 1pm in Hong Kong, yielding speculation that the Chinese authorities will intervene to foster economic growth.
Across the globe, the S&P500 Index rose to record highs on Monday, undoing earlier losses following a correction in the Institute for Supply Management’s reading of its May index. At 4pm in New York the SPX was at 1924.97, while the Dow Jones Industrial Average was up 26.46 points or 0.2 percent.
Eyes on the ECB
In Europe, however, things weren’t quite as optimistic, as the region braces for European Central Bank’s President Mario Draghi’s address on Thursday. The region is suffering from low inflation, and the euro has gained 4 percent against the dollar over the past year, which may continue threatening the region’s ability to grow. Rate cuts may help with this process, though skeptics are concerned that there isn’t much room for cuts before the rates turn negative. Should the ECB cross over to negative deposit rates, it would be the first major central bank to chart these waters.
Additional concerns about ECB rate cuts focus on how such a maneuver would impact the banking sector as well as private households. Money holders may choose not to deposit money in banks, and the sector’s profitability could be jeopardized.
Many analysts are expecting a cut to both refinance and deposit rates of about 10 points to be announced at Thursday’s meeting. Hopefully these moves, if they prove true, could help weaken the euro.