- European Central Bank Slows its Bond Purchases
- Biden Speaks with Jinping
- Positive Atmosphere in Global Markets
European Central Bank Slows its Bond Purchases
On Thursday, the European Central Bank maintained its monetary policy but slowed the rate of net asset purchases under its pandemic emergency purchase program.
The Governing Council decided to keep the interest rate on the ECB’s main refinancing operations at 0%, 0.25 percent for the marginal lending facility, and -0.5 percent for the deposit facility.
Markets were looking for signals of unwinding of pandemic-era stimulus in the Frankfurt institution’s latest policy decision, which came amid rising inflation and solid economic growth.
ECB President Christine Lagarde stated that the decision was a “unanimous conclusion in all respects” during a press conference on Thursday.
Following the decision to trade at approximately $1.1837, the euro rose 0.2 percent versus the dollar, while European markets pared early losses. The European Central Bank (ECB) underlined that interest rates will continue at current or lower levels until inflation reaches 2%.
In addition, ECB Chief Economist Philip Lane said in a recent interview that “September is very far away” from the planned PEPP conclusion date, suggesting a tapering announcement may yet be a few months away.
Biden Speaks with Jinping
President Joe Biden spoke with President Xi Jinping of China on Thursday evening. Relations between the two countries have remained tense in recent months, particularly in cyberspace, with the US having accused China of widespread malfeasance, including a massive hack of Microsoft’s email system and other ransomware attacks.
“The two leaders had a broad, strategic discussion in which they discussed areas where our interests converge, and areas where our interests, values, and perspectives diverge,” said a readout of the call, provided by the White House. “They agreed to engage on both sets of issues openly and straightforwardly. This discussion, as President Biden made clear, was part of the United States’ ongoing effort to responsibly manage the competition between the United States and the PRC.”
According to a senior administration official who talked with reporters before and after the call, Biden discussed cyber threats and generally wanted to have a “wide and strategic discussion” about how to manage the competitive US-China relationship without falling into conflict.
The Biden administration has indicated that it intends to maintain a tough stance toward China, similar to that of former President Donald Trump, but that it will do so in consultation with allies and hopes to establish parameters that allow countries to express concerns and areas of disagreement while also cooperating when it is in both countries interests.
Xi told Biden that America’s attitude toward China has generated “severe challenges” in the nations’ relations, according to Chinese state media Xinhua news.
Positive Atmosphere in Global Markets
Concerns about the course of the recovery, global markets, which were tense after the regulatory news from China, entered a positive atmosphere on the last trading day of the week. Asian stocks started the day with a rise as the measure announced for video games in China was clarified and the rally continued in Japan.
Hong Kong’s Hang Seng led the recovery, while Japan’s Topix and Nikkei 225 rose 1 percent. US and European futures pointed to a positive open. S&P 500 futures are up 0.2 percent, while Euro Stoxx 50 is up 0.1 percent. The Bloomberg Dollar Index is flat at 1.144.
After Biden and Chinese President Xi Jinping’s phone call, the offshore yuan appreciated by 0.2 percent against the dollar, preparing for the strongest daily close since June 16. The White House said in a statement that the two leaders had a “comprehensive and strategic meeting” while discussing “issues where interests intersect and where interests, values, and perspectives diverge”.
After the high demand for long-term bond auctions in the USA, the 5-30 year bond spread decreased by 5 basis points and approached the bottom of a year with 110 basis points. The US 10-year benchmark bond, on the other hand, rose by one basis point to 1.31 percent.