Global markets extend rally ahead of ECB, FOMC meet

By Gautam Broker, Research Analyst at CNBC-TV18

Rally extended in global markets on Europe’s resolve to save Euro. US markets were at their best on Friday since early May.

BBG reports indicate that European Central Bank President Mario Draghi is likely to meet German Central Bank head to discuss steps to aid Eurozone.

Bloomberg's sources say private talks between the two include the option of bond buying

German chancellor Angela Merkel and French President Francois discuss implementation of decisions taken at June Summit. They issued a joint statement post the call saying Germany and France are deeply committed to the integrity of the euro zone, and both counties determined to do everything to protect the euro zone.

Separately French press reports indicate that ECB and Eurozone are working on coordinated action to lower Spanish, Italian yields

Spanish 10-year bond yields went down to 6.7% (high was 7.78%) and Italian 10-year bond yields fell below 6% post optimistic statements.

Agencies report that Greece has managed to finalize austerity measures to achieve 2013-14 targets

Euro saw a 3-week high but cooled off later as ECB and German central bank statements play spoilsport.

German Central Bank spokesman says “Bond purchases are problematic because it sets the wrong incentives.”

US Q2 GDP stood at 1.5%, which was at higher end of subdued expectation of 1.2-1.5% 

US consumer sentiment came in at 72.3, which was largely in-line with expectations at 72

Merck and Amazon June quarter earnings surprised positively; US markets volumes shot up 10% higher than year average.

US markets at close: Dow Jones rallied 1.5% to 13,075.7 and S&P 500 Index was up 1.9% at 1,386. Nasdaq Composite shot up 2.2%

European markets at close: DAX was up 1.6%, CAC gained 2.3% and FTSE moved up 1%. Spain surged 3.9% and Italy spiked 2.9%

US markets last week: Dow Jones gained 2%, S&P rose 1.7% and Nasdaq Composite was up 1.1%

US markets year-to-date performance: S&P 500 Index shot up 10.2% while Dow Jones gained 7%. Nasdaq climbed 13.6%     

US Treasury Secretary Timothy Geithner will meet Draghi and German central bank head today. FOMC decision will be scheduled for August 1.

Asia today

Hang Seng rallied 1.1%

Kospi rose 0.8% and Straits Times went up 0.7%

Nikkei and Taiwan Weighted were up 0.6%

Shanghai was flat.

SGX Nifty was up 0.6% at 5166

Currencies

Euro hit a high of 1.239 against the US dollar on Friday but pared gains to close up 0.3% at 1.232.

It saw further profit booking today morning; it was at 1.229 to the dollar.

Dollar index hit a 3-week low of 82.3 on Friday; but fell 0.1% at 82.7 at close.

Commodities

On Friday, Brent crude was up 1.1% at USD 106.5 a barrel and WTI crude rose 0.8% at around USD 90 a barrel

For the week, WTI crude fell 1.4% while Brent crude was flat 

LME Copper was up 1.3% and Gold moved up 0.5% at USD 1623 an ounce

Commodities were largely flat today morning

What to watch out for

UK Consumer Credit, Consumer Confidence 

EZ Consumer Confidence

Dallas Fed Manufacturing Index