US open – Stocks take a breather, ECB eyed

Tech Remains in Focus

Stock markets are enjoying a bit of a breather in early trading on Thursday, with Europe off marginally and US futures – including the Nasdaq at the time of writing – also only down a little.

This comes after a frantic week that’s seen US tech stocks rapidly enter correction territory, with reports of Softbank betting heavily on the sector in recent months further accelerating the decline. A strong fight back on Wednesday may encourage investors that now see some of their favourite names trading at a heavy discount to a week ago and look much less frothy.

We shouldn’t be lulled into a false sense of security though just because the moves we’re seeing pre-market look a little more normal. We’ve seen an excessive amount of volatility over the last week and the tech sector has only been set back a month. That’s not to say we’re definitely going to see further sharp falls but it should perhaps be approached with caution.

ECB expectations pared back, stimulus hints eyed

Expectations for today’s ECB meeting appear to have pared back over the course of this week which is a little surprising under the circumstances. The bloc is seeing a surge in Covid cases, a slowdown in the economic recovery and negative inflation. Add to this a stronger euro and the central bank surely has more than enough amunition to justify more easing this year?

The headwinds will only grow stronger for the ECB as we enter the final months of the year. These second waves have been problematic but, if the experts are correct, they pale to insignificance compared to what is expected over the winter months. The economic projections should provide more colour on how the central bank sees the situation evolving.

More easing today looks unlikely, but armed with lower projections for growth and inflation, the ECB may lay the groundwork for more stimulus in the coming months should the reality follow the warnings. And they won’t be alone in that, other central banks will likely follow a similar path.

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.