US pre-open: New York wary ahead of ECB stimulus meeting

A European Central Bank meeting to discuss stimulus measures will dictate investor sentiment in America when the market opens.


The European Central Bank's meeting is a hot topic in America

US stocks are seen opening on a mixed note, with all eyes on a European Central Bank (ECB) governing council meeting at which policymakers will discuss further measures to stimulate the sickly eurozone economy.

Online trading firm CMC Markets is anticipating the Dow to open ten points higher at 17,912, but the S&P 500 to ease a point at 2,073. Nasdaq is seen gaining twopoints to 4,312.

As across Europe this morning, US investors will be closely watching developments this afternoon in Frankfurt, where ECB policymakers will be meeting to discuss the potential for further stimulus measures.

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Markets would, of course, welcome the ECB committing itself to a full-blown quantitative easing programme, but the jury is out as to how far the governing council will go towards that, creating uncertainty for investors.

Jasper Lawler, analyst at CMC, says US shares have recently been trending higher and have an element of fresh ECB stimulus already priced in. The main risk to this positive short-term trend in US shares continuing is that Mario Draghi this afternoon fails to provide any specific guidance on eurozone government bond purchases, he says.

Yesterday, the Fed's Beige Book, a snapshot of regional economic activity, pleased with indications of a widespread upturn in hiring across the US. But global growth remains a major headwind to further gains in US shares, says Lawler.

"A more proactive ECB will be perceived as good for European growth prospects and for US businesses that do business in Europe. An indication of further ECB stimulus this afternoon could see large-cap multinational US shares outperform with the Dow possibly outperforming the S&P 500 given the greater exposure to Europe."

On the corporate front, Disney shares are expected to open higher after the company announced in an after-hours statement that it will hike its dividends by over 30%.

Elsewhere, earnings reports are due from Dollar General, Kroger, Guess, Barnes and Noble, American Eagle and Sears.

In commodities news, The Wall Street Journal notably reported late this morning that Opec's biggest oil producer, Saudi Arabia, now believes oil prices could stabilise at around $60/barrel, a level both it and other Gulf producers reckon they could withstand, citing people familiar with the situation.

WSJ believes the shift in Saudi thinking suggests the de facto leader of Opecwill not push for supply cuts in the near term, even if oil prices fall further.

Kam Patel

Kam is a former deputy editor at Hemscott Invest and online editor, City A.M and he was also previously the Digital Editor at IFA Magazine. Kam is currently a senior journalist at The Global Treasurer and contributes to MoneyWeek. Kam shares expertise on the FTSE 100, investing and global stocks.