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Another Brutal Session as Global Growth Fears Grow

It was another brutal session on Wall Street overnight, which saw the Dow slide another 600 points and the Nasdaq enter correction territory. Whilst the fundamental backdrop to the US economy remains solid, traders can’t turn a corner psychologically and technically.

The latest selloff was driven by a sharp decline in tech stocks and persistent concerns over corporate earnings. Tech stocks have rallied hard across the year, it’s understandable that investors are cautious that results and, perhaps more importantly, forward guidance’s, are not going to support such lofty valuations given the global growth issues and US-Sino trade tensions. Several big names, including Microsoft and Tesla, reported better than expected quarterly results after the bell, lifting US futures. Advanced Micro Devices tumbled over 22% despite better than forecast earnings, as the firm issued weak guidance.

Asian shares picked up where Wall Street closed, plummeting across the session. European shares are looking towards another bloodbath. Global growth fears were accentuated across Wednesday. Downbeat manufacturing PMI’s in Europe and weak US housing data, as rising interest dampens demand, weighed on sentiment. These factors add to an already long list of global concerns, with tensions elevated after police intercepted bombs to the Clintons and other high-profile Democrats. Easy money and strong global growth periods are drawing to a close, Citibank lowered their growth expectations for 2019 and 2020 citing monetary policy tightening by the Fed.

ECB policy meeting – what to expect?

The ECB will give its monetary policy decision today at 11:30 GMT. The ECB is widely expected to keep interest rates on hold. Investors will direct their attention to ECB President Mario Draghi’s press conference. Draghi is expected to field questions on monetary policy, Italy’s clash with Brussels overspending, falling eurozone inflation and the risks surrounding global trade tensions.

Currently, the market is expecting the ECB to conclude its bond-buying programme at the end of this year. The first rate hike is not expected until early autumn next year. Whilst risks are staking up across the globe these are not expected to impact on the ECB’s outlook for hiking rates next year. However, should these risks continue, the ECB could signal a delay or a very slow path to further rate rises.

The euro hit a 2-month low versus the dollar in the previous session as Italy’s clash with Brussels over its budget rages on. Cautious words from Draghi on Rome’s defiant stance, softer inflation or global trade tensions could pull the euro even lower.

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