Markets Up Sharply Higher As Fed Meeting Kicks Off, ECB Hints At Lowering Rates

U.S. equity futures

Fed meeting in focus

U.S. equity futures rose sharply on Tuesday as investors anticipated a more accommodative policy stance from the Federal Reserve, which is set to start its two-day monetary policy meeting today.

As of 5:20 a.m. ET, futures on the blue-chip Dow were up 69.5 points, or 0.27% to 26,207.5. Futures on the tech-heavy Nasdaq 100 climbed 42.87 points, or 0.57% to 7,604.12 while those on the broader S&P 500 rose 9.13 points, or 0.32% to 2,905.38.

Policymakers will debate whether to lower interest rates or leave them unchanged amid slowing economic growth and rising trade tensions. The Fed left interest rates unchanged in a range of 2.25% to 2.5% in March, and pledged to be patient with future rate increases.

However, Fed chairman Jerome Powell and other policymakers have recently suggested that they are prepared to act accordingly to stimulate economic growth.

According to data compiled by CME Group’s FedWatch tool, prospects of a rate cut at this week’s meeting have dropped to a probability of 20.8%, though money markets are pricing in a 67.9% probability of a 25 basis point cut during the Fed’s July meeting.

ECB president hints at more stimulus

In Europe, the euro tumbled while stocks reversed earlier losses after European Central Bank (ECB) President Mario Draghi suggested that he would consider further monetary easing.

Speaking to reporters in Portugal, Draghi said the ECB has room for additional asset purchases or to slash interest rates again if inflation does not pick up.

“Monetary policy can always achieve its objective alone but, especially in Europe where public sectors are large, it can do so faster and with fewer side effects if fiscal policies are aligned with it,” Draghi said.

As of 6:08 a.m. ET, the euro was down 0.3% to $1.1185 following his comments. Economists are pricing in a 10 basis point ECB rate cut by December.

Facebook unveils Libra cryptocurrency

Facebook Inc (NASDAQ: FB) on Tuesday released a white paper detailing plans for its Libra cryptocurrency that will roll out in the first half of 2020. The digital currency will be backed by stable financial assets and be managed by an external independent foundation based in Switzerland.

According to the white paper, Libra will allow Facebook’s 2.38 billion users to pay for goods and services or send money to each other with nearly zero fees. The currency will be available in WhatsApp, Messenger, and in a standalone app. Shares of the social media giant were trading 1.57% higher in pre-market trading hours.

U.S. sends more troops to the Middle East amid growing tensions

The Pentagon is sending an additional 1,000 troops and more military resource, as tensions between Washington and Tehran continue to build.

Acting U.S. Secretary of Defense Patrick Shanahan made the announcement on Monday, citing “hostile behavior by Iranian forces and their proxy groups that threaten United States personnel and interests across the region.”

News of the additional troop deployment comes after two oil tankers were torpedoed in the Gulf of Oman last week. The U.S. government blamed the Middle Eastern nation for the attacks.