Wall St stalls as eyes go on ECB

Traders Fred DeMarco, left, and Greg Mulligan confer on the floor of the New York Stock Exchange. File photo / AP

Investors flocked to a US auction of US$35 billion in five-year notes overnight as European bond yields sank to record lows amid bets that the European Central Bank will add more stimulus in an effort to prop up the flagging euro-zone economy.

"It was a fantastic auction," Ray Remy, head of fixed income in New York at Daiwa Capital Markets America, one of 22 primary dealers obligated to bid at US auctions, told Bloomberg News. "What's driving the US Treasury market is what's going on in Europe. As Europe moves to lower yields, money is moving into the US Treasury market to take advantage of the bigger spread between the two."

A report showed that a gauge of German consumer confidence dropped more than expected, the latest sign of concern about Europe's key economy. And in Italy, Economy Minister Pier Carlo Padoan said the country must downgrade its official growth forecasts.

ECB policy makers next meet September 4 amid elevated expectations of additional stimulus following ECB President Mario Draghi's comments about the region's declining inflation in Jackson Hole last week.

To be sure, the ECB is unlikely to take new policy action next week unless August inflation figures, due on Friday, show the euro zone sinking significantly towards deflation, Reuters reported, citing unnamed ECB sources.

"The barrier to QE is still very high," said one of the sources, all of whom requested anonymity, adding that discussion at the meeting was expected to centre on reinforcing existing policy measures of credit easing and liquidity provision, according to Reuters.

Wall Street stalled, holding the Standard & Poor's 500 Index near record highs.

In late afternoon trading in New York, the Dow Jones Industrial Average inched 0.09 per cent higher, while the Nasdaq Composite Index eked out a 0.06 per cent gain. The Standard & Poor's 500 index was unchanged at 1,999.98.

The Dow moved higher as gains in shares of UnitedHealth and Pfizer, up 2 per cent and 1.1 per cent respectively, outweighed declines in United Technologies and IBM, down 0.6 per cent and 0.5 per cent respectively.

"Many of the blocks are in place for the equity markets to make further progress," Richard Hunter, the head of equities at Hargreaves Lansdown in London, told Bloomberg News.

Shares of Tiffany rose, last up 1.35 per cent, after the jewellery retailer reported second-quarter profit that surpassed expectations and lifted its full-year earnings forecast.

"These healthy second quarter results reflected solid sales growth in our stores, particularly in the Americas and Asia-Pacific regions," Michael Kowalski, Tiffany's chief executive officer, said in a statement. "In addition, an improved gross margin was an important contributor to the earnings growth."

In Europe, the Stoxx 600 Index ended the session 0.1 per cent higher than the previous close, as did the UK's FTSE 100. France's CAC 40 closed with an advance of 0.04 per cent. Germany's DAX slipped 0.2 per cent.