By Nathan Allen
-- German 10-year bund yields fell to a record low of minus 0.299%
-- Global stocks mostly rose, though Japan's Nikkei slipped 0.7%
-- The yield on 10-year U.S. Treasurys dipped to 2.050%
European stocks reversed early losses and bond yields dropped Tuesday after European Central Bank President Mario Draghi raised the possibility of fresh stimulus for the eurozone.
The yield on 10-year German bunds declined to a record low of minus 0.299% after Mr. Draghi said additional monetary stimulus would be required if EU inflation doesn't improve. Yields move in the opposite direction to prices.
Speaking at the ECB's annual conference in Sintra, Portugal, Mr. Draghi said the bank still has considerable headroom to buy more bonds and that further interest-rate cuts remain a possibility.
His remarks came amid concerns the bank lacks sufficient tools to support the regional economy after eurozone inflation expectations recently hit a new low.
"The markets are now pricing in a 10 basis point cut before the end of the year and it seems that once more we're getting a concerted effort from major central banks to prop up the global economy," said David Cheetham, chief market analyst at XTB.
Meanwhile in equities, Germany's Siltronic AG fell more than 12% after the chip maker cut its 2019 guidance, citing the dampening effects of global trade tensions, while rival Infineon AG shed 5% after a EUR1.5 billion capital increase.
Rising tensions between the U.S. and Iran were overhanging market activity, adding to the risk-off mood. Tehran said Monday it would exceed limits on its enriched-uranium stockpiles, while Washington pledged to send an additional 1,000 troops to the region.
Central bank meetings in the U.S. and Asia were also in focus, with traders reluctant to take definitive positions until the Federal Reserve publishes its decision on a potential rate cut on Wednesday. Fed officials don't want to disappoint markets, which were pricing in further easing, but robust U.S. economic data may push them to leave rates unchanged for now.
"A less dovish readjustment in the language could be a disappointment for the markets and send the U.S. stock and bond markets tumbling," Ipek Ozkardeskaya, senior market analyst at LCG Capital said.
In the U.K., the British pound fell overnight to its lowest level against the dollar since January ahead of the second round of the Conservative Party leadership contest this afternoon. Front-runner Boris Johnson is a proponent of Britain leaving the European Union without a deal, a move that would likely do significant damage to the U.K's growth prospects.
Most Asian markets posted modest gains, with Hong Kong's Hang Seng Index rising 1% to extend Monday's rally. Korea's Kospi rose 0.4% but Japan's Nikkei 225 fell 0.7%.
Futures for the S&P 500 and the Dow Jones Industrial Average were trading 0.3% higher after both indexes inched up Monday. Changes in futures don't necessarily reflect moves after the opening bell.
In commodities, Brent crude dropped 0.4% to $60.69 a barrel, while gold rose 0.5% to $1,350 a troy ounce.
The WSJ dollar index, which measures the currency against a basket of its peers, was flat.
(END) Dow Jones Newswires
June 18, 2019 05:44 ET (09:44 GMT)
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