Pages

Monday, 24 July 2017

Asian shares edge up, buoyant euro holds its gains


SINGAPORE (Reuters) - Asian stocks edged slightly higher on Monday, while the European Central Bank's apparent equanimity at the euro's nearly two-year highs left the dollar languishing.

European markets are expected to open mixed, with financial spreadbetter CMC Markets predicting Britain's FTSE 100 .FTSE to open 0.1 percent lower, Germany's DAX .GDAXI to open little changed, and France's CAC 40 .FCHI to start the day up 0.1 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS reversed earlier losses to edge up 0.2 percent.

Chinese bluechips .CSI300 and the Shanghai Composite .SSEC were both up 0.3 percent. Hong Kong's Hang Seng .HSI added 0.5 percent.

But Japan's Nikkei .N225 dropped 0.6 percent, pressured by a stronger yen. Australian shares retreated 0.7 percent and South Korea's KOSPI .KS11 edged down 0.1 percent.

Despite a pullback in Asia-Pacific stocks, sentiment remains solid, said Jim McCafferty, head of equity research for Asia Pacific at Nomura.

"The first three weeks of July have seen continuation of strong first half performance," McCafferty said. "We are just three weeks in to the second half of the year and investors are continuing to like the Asia-Pacific story."

On Friday, global stocks .MIWD00000PUS ended a 10-day winning streak, taking a breather from a rally that had propelled them to a record high in the previous session. The index was flat on Monday.

Wall Street indexes .SPX  ended Friday flat to about 0.15 percent lower, as disappointing earnings from General Electric and energy shares weighed.

European shares also closed lower, with Germany's DAX slumping 1.7 percent, hurt by the euro's strength.

The euro was trading 0.1 percent higher at $1.16715 on Monday, just a whisker below a nearly two-year high of $1.1684 hit earlier in the session.

ECB President Mario Draghi's comments on Thursday, which conspicuously avoided citing the euro's recent strength as a problem, emboldened traders convinced the central bank will begin tapering its bond-buying programme later this year.

"There has been very little back-pedalling on the long euro storyline as dealers continue to place much emphasis on Draghi declining the opportunity to talk down the currency post-ECB minutes," Stephen Innes, head of Asia-Pacific trading at OANDA, wrote in a note.

"And factoring in the expanding U.S. political sinkhole which is weighing on broader USD sentiment, it's unlikely the market has run out of steam," he wrote, adding he expects the euro to test the August 2015 high of $1.1715 "sooner than later".

The dollar index .DXY, which tracks the greenback against a basket of trade-weighted peers, crept higher but remained subdued on Monday.

After touching 93.823, its lowest level since June 2016 early on Monday, it edged up to 93.880, marginally above Friday's close.

The dollar continued to slide against the yen, however, retreating 0.1 percent to 111.020 yen.

Markets are awaiting the Federal Reserve's meeting on Tuesday and Wednesday for an update on its plan to start normalising its balance sheet.

"All eyes will be on the Fed this week, with market participants eager to see if the Fed formally announces the start of its balance sheet normalisation plan or opts to wait until September," Michala Marcussen, global head of economics at Societe Generale, wrote in a note.

"We are in the September camp, but we acknowledge that it is a coin toss between this week's meeting and the next one."

In commodities, oil prices roes on expectations that the joint OPEC and non-OPEC ministerial meeting later in the day would address rising production from Nigeria and Libya, two OPEC members exempted from the cuts, bolstered prices.

However, gains were capped by a consultant's forecast of a rise in OPEC production for July despite the group's pledge to curb output, which led to a plunge in prices on Friday.

Global benchmark Brent crude was up 0.1 percent at $48.10 a barrel, after Friday's 2.5 percent tumble, while U.S. crude edged up slightly to $45.79, after Friday's 2.2 percent slump.

Gold shone on the dollar's weakness and a decline in risk appetite, with spot gold just slightly lower at $1,254.31 an ounce, retaining most of Friday's 0.8 percent jump, and slightly below a one-month high hit earlier.

Reporting by Nichola Saminather

Dollar falls on perceived ECB path, U.S. political roadblocks


NEW YORK (Reuters) - The U.S. dollar hit its lowest level in more than a year against a basket of major rivals on Friday a day after the European Central Bank's chief abstained from talking down the euro, while obstacles to U.S. President Donald Trump's policy agenda also weighed.

ECB President Mario Draghi said on Thursday that financing conditions remained broadly supportive, and noted that the euro's appreciation had "received some attention." However, he did not cite that strength as a problem nor did he directly try to talk the currency down.

Draghi's apparent lack of concern about the strengthening euro convinced traders that the central bank remained on track to potentially begin tapering its bond-buying stimulus later this year.

The dollar index touched 93.854 .DXY, its lowest level since June of last year, and was last down about 0.5 percent at 93.885. The euro touched $1.1682 EUR=, its highest level against the dollar in nearly two years, and was last up 0.4 percent on the day at $1.1674.

"The fact that Draghi didn’t necessarily argue too much against the strength of the euro ... certainly gave the greenlight for individuals to want to own the currency again or actually add to their positions," said Dean Popplewell, chief currency strategist at Oanda in Toronto.

The euro was last on track to gain 1.8 percent for the week, which would mark its second straight weekly rise against the dollar. The dollar index was set to fall 1.3 percent to mark its second straight weekly decline.

Against the yen, the dollar touched more than four-week low of 111.02 yen.

In addition to traders' expectations that the ECB was staying the course toward tightening monetary policy, investigations into alleged Russian meddling in the U.S. election and possible collusion with Trump's campaign were viewed as obstacles to the administration's pro-growth agenda and negative for the dollar.

"Compounding the (weaker dollar) move is this latest news on the political front in the U.S. about the Russia investigation expanding to Trump’s business affairs," said Alvise Marino, FX strategist at Credit Suisse in New York.


"This is on top of the fact that Senate has not been able to pass anything meaningful on the healthcare front," he said in reference to the collapse late on Monday of a Republican effort to overhaul the U.S. healthcare system.

The dollar touched its lowest against the Swiss franc in more than a year at 0.9440 franc .

Reference: Sam Forgione

Friday, 21 July 2017

Sterling skids to eight-month low against rallying euro


LONDON (Reuters) - Sterling skidded to an eight-month low against the euro on Thursday, trading close to 90 pence after the head of the European Central Bank said possible changes to policy would be discussed in the autumn.

Though Mario Draghi said no date had been set for discussing any changes to the programme and that ECB rate-setters had been unanimous in their decision not to change their guidance an monetary policy, investors reckoned discussions in the autumn would lead to monetary tightening next year.

The euro jumped as much as 1.5 percent against the pound, touching 89.765 pence, its strongest since early November.

"Traders may have found that Draghi's comments were less dovish than anticipated, despite his emphasis on the continued need for significant stimulus and on subdued underlying inflation," said Caxfon FX anaylst Alexandra Russell-Oliver.

"Ultimately, the expected winding down of stimulus will likely continue to be supportive of the euro."

Against the dollar, sterling dipped back below $1.30 on concern UK ministers are prepared to walk away from Brexit talks without a deal. That mood of uncertainty outweighed a slightly better-than-expected batch of retail sales numbers.

That briefly helped the pound recover some ground from a fall after Trade Minister Liam Fox said in a radio interview the country could get by without a Brexit trade deal - an outcome many economists have warned could cripple business activity.

"Official comment this morning suggesting the UK can survive with no Brexit deal will likely outweigh (the retail sales numbers) on the pound (and) maintain the downtrend," said Neil Jones, head of hedge fund FX sales at Mizuho in London.

The pound rose above $1.31 to 10-month highs earlier this week as the dollar fell across the board, and as investors bet the 25-basis-point cut in British interest rates after last year's vote for Brexit could be reversed in the coming months.


But BoE policymakers have made it clear that any monetary tightening will be data-dependent.

Thursday's retail sales numbers showed sales rose 2.9 percent in June compared with a year earlier, and 0.6 percent on the month - both beating forecasts in a Reuters poll.

Reference: Patrick Graham and Jemima Kelly

BOJ pushes back inflation target for sixth time, keeps policy steady


TOKYO (Reuters) - The Bank of Japan kept monetary policy steady on Thursday but once again pushed back the timing for achieving its ambitious inflation target, reinforcing views that it will lag well behind other major central banks in scaling back its massive stimulus program.

With robust exports and private consumption pointing to a steady though modest recovery, the Japanese central bank slightly raised its growth forecasts and offered a more upbeat view of the world's third-largest economy than last month.

But stubbornly weak price growth forced the BOJ to cut its inflation forecasts, underscoring the challenges the central bank faces as it tries to reflate the economy and coax consumers to spend more.

"Recent price developments have been relatively weak, as companies remained cautious in raising wages and prices," the BOJ said in a quarterly report on its long-term growth and inflation projections.

"Risks to the economy and price outlook are skewed to the downside," it said, conceding it has proved harder than expected to change public perceptions that deflation will persist.

The BOJ pushed back by a year the timing for hitting its ambitious 2 inflation target, in a fresh blow to Governor Haruhiko Kuroda's radical monetary experiment aimed at sustainably ending deflation.

It now expects inflation will not reach that level until sometime in the fiscal year ending in March 2020.

The BOJ has now pushed back the price target timeframe six times since Kuroda launched his huge asset-buying program in 2013.

"The BOJ's hands are tied. Central banks in the United States and Europe are headed toward higher rates and balance sheet reduction, but the BOJ is headed in the opposite direction," said Hiroaki Muto, economist at Tokai Tokyo Research Center.

"The message seems to be the BOJ is prepared to maintain easy policy indefinitely..."

As widely expected, the BOJ maintained its short-term interest rate target of minus 0.1 percent and its 10-year government bond yield target of around zero percent.

The central bank also kept intact guidance that it would keep buying government bonds so its holdings increase at an annual pace of 80 trillion yen ($714 billion).

While companies were facing rising labor costs from a tight job market, many of them were making ends meet by hiring more temporary workers and streamlining operations, the BOJ said.

Such efforts are weighing on wages and prices, creating a disconnect between stronger economic activity and low inflation, it said.

Growth, Price Mismatch

At his post-meeting news conference (0630 GMT), Kuroda is likely to remind markets of the BOJ's resolve to maintain ultra-easy policy until inflation is sustainably above target.

That would put the BOJ far behind the U.S. Federal Reserve, which has been gently raising rates and is expected to announce detailed plans in September to start shrinking its more than $4 trillion balance sheet.

The European Central Bank (ECB) is also expected to announce plans in coming months to taper its asset purchases as growth picks up on the continent, according to a Reuters poll.

Both the Fed and the ECB are also facing stubbornly low inflation that is puzzling policymakers, though levels are not as tepid as Japan's.

In a testament to the improving economy, the BOJ raised its growth projections for the current fiscal year to 1.8 percent from 1.6 percent forecast three months ago, and to 1.4 percent from 1.3 percent for the following year.

"Japan's economy is expanding moderately," the BOJ said, a brighter assessment than last month when it said it was turning toward a moderate expansion.

But it slashed its consumer inflation forecasts for the year ending in March 2018 and the following year, to 1.1 percent from 1.4 percent, and to 1.5 percent from 1.7 percent.

Japan's economy grew at an annualized 1.0 percent in the first quarter thanks to robust global demand and a pick-up in private consumption. Data earlier on Thursday showed its exports rose for a seventh straight month in June.

But core consumer prices in May rose just 0.4 percent from a year earlier, well below the BOJ's 2 percent target.

Reference: Leika Kihara and Tetsushi Kajimoto

Thursday, 20 July 2017

Euro clings to ECB tapering hopes, yen little moved after BOJ


SINGAPORE (Reuters) - Asian shares scaled a near-decade peak on Thursday, bolstered by a surge in global stocks to new records on strong U.S. corporate earnings, while the yen eased slightly after the Bank of Japan reinforced expectations it will lag other central banks in dialling back stimulus.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 0.15 percent, hovering near its highest level since December 2007.

Australian stocks rose 0.6 percent and South Korea's KOSPI .KS11 was up 0.1 percent.

Chinese blue chips .CSI300 advanced 0.15 percent, while the Shanghai Composite .SSEC edged up 0.25 percent. Hong Kong's Hang Seng .HSI crept up 0.3 percent.

The MSCI World index .MIWD00000PUS inched up in its 10th straight session of gains on Thursday and set a record high for the sixth consecutive day, lifted by all-time closing highs on Wall Street in the wake of strong earnings reports.

"In the U.S., the earnings season seems to be surprising a little bit on the upside," said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland.

"What we have seen recently in the economic reports suggests it should be even better overseas... So we have come to the point where things look pretty good in the U.S. and it looks even better in prospect overseas, so what's not to like about equities," he said.

The yen weakened slightly after the BOJ pushed back its projected timing for hitting its 2 percent inflation target, as it cut price forecasts until fiscal year 2020.

The Japanese currency slipped 0.2 percent to trade at 112.10 yen to the dollar following the BOJ decision. The weaker yen helped lift the Nikkei .N225 0.4 percent.

The euro was steady at $1.15195 on Thursday, ahead of a meeting of the European Central Bank later in the session.

The common currency hit 14-month high this week following seemingly hawkish comments by ECB President Mario Draghi.

At Thursday's meeting, the ECB may drop a reference to its readiness to increase the size or duration of its asset-purchase programme before announcing in the autumn how and when it will start winding down its bond buying.

"The euro has surged enormously on the back of hopes that the ECB is going to start the process of shutting the door on loose monetary policy," Naeem Aslam, chief market analyst at ThinkMarkets UK, wrote in a note.

"The ECB needs to be clear about its forward guidance and it should reinforce that in a subtle manner. Coming out of the gates too aggressively would create shock waves in the market."

The dollar index .DXY, which tracks the greenback against a basket of trade-weighted peers, was flat at 94.784.

The Australian dollar set a new two-year high on Thursday, still heady from the minutes of the last Reserve Bank of Australia meeting, released Tuesday, which showed the central bank had turned more upbeat on the economic outlook.

It pulled back from that high to trade down 0.15 percent from Wednesday's close at $0.7942.

The Canadian dollar was about 0.1 percent weaker at C$1.2615 to the dollar. On Tuesday, it touched a 14-month high on record domestic factory sales and stronger oil prices.

Oil prices, which hit a two-week peak on Wednesday on a bigger-than-expected weekly draw in crude and gasoline inventories in the United States, were marginally lower on Thursday.

U.S. crude fell 0.1 percent to $47.07 a barrel, after jumping 1.6 percent overnight.

Global benchmark Brent also lost 0.1 percent to $49.64, holding on to most of Wednesday's 1.8 percent gain.

Gold pulled back 0.15 percent to $1,238.55 an ounce on Thursday.

Reference: Nichola Saminather

Asia stocks hit near-decade high, yen slips as BOJ cuts inflation forecast


SINGAPORE (Reuters) - Asian shares scaled a near-decade peak on Thursday, bolstered by a surge in global stocks to new records on strong U.S. corporate earnings, while the yen eased slightly after the Bank of Japan reinforced expectations it will lag other central banks in dialling back stimulus.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 0.15 percent, hovering near its highest level since December 2007.

Australian stocks rose 0.6 percent and South Korea's KOSPI .KS11 was up 0.1 percent.

Chinese blue chips .CSI300 advanced 0.15 percent, while the Shanghai Composite .SSEC edged up 0.25 percent. Hong Kong's Hang Seng .HSI crept up 0.3 percent.

The MSCI World index .MIWD00000PUS inched up in its 10th straight session of gains on Thursday and set a record high for the sixth consecutive day, lifted by all-time closing highs on Wall Street in the wake of strong earnings reports.

"In the U.S., the earnings season seems to be surprising a little bit on the upside," said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland.

"What we have seen recently in the economic reports suggests it should be even better overseas... So we have come to the point where things look pretty good in the U.S. and it looks even better in prospect overseas, so what's not to like about equities," he said.

The yen weakened slightly after the BOJ pushed back its projected timing for hitting its 2 percent inflation target, as it cut price forecasts until fiscal year 2020.

The Japanese currency slipped 0.2 percent to trade at 112.10 yen to the dollar JPY=D4 following the BOJ decision. The weaker yen helped lift the Nikkei .N225 0.4 percent.

The euro was steady at $1.15195 on Thursday, ahead of a meeting of the European Central Bank later in the session.

The common currency hit 14-month high this week following seemingly hawkish comments by ECB President Mario Draghi.

At Thursday's meeting, the ECB may drop a reference to its readiness to increase the size or duration of its asset-purchase programme before announcing in the autumn how and when it will start winding down its bond buying.

"The euro has surged enormously on the back of hopes that the ECB is going to start the process of shutting the door on loose monetary policy," Naeem Aslam, chief market analyst at ThinkMarkets UK, wrote in a note.

"The ECB needs to be clear about its forward guidance and it should reinforce that in a subtle manner. Coming out of the gates too aggressively would create shock waves in the market."

The dollar index .DXY, which tracks the greenback against a basket of trade-weighted peers, was flat at 94.784.

The Australian dollar set a new two-year high on Thursday, still heady from the minutes of the last Reserve Bank of Australia meeting, released Tuesday, which showed the central bank had turned more upbeat on the economic outlook.

It pulled back from that high to trade down 0.15 percent from Wednesday's close at $0.7942.

The Canadian dollar was about 0.1 percent weaker at C$1.2615 to the dollar. On Tuesday, it touched a 14-month high on record domestic factory sales and stronger oil prices.

Oil prices, which hit a two-week peak on Wednesday on a bigger-than-expected weekly draw in crude and gasoline inventories in the United States, were marginally lower on Thursday.

U.S. crude fell 0.1 percent to $47.07 a barrel, after jumping 1.6 percent overnight.

Global benchmark Brent also lost 0.1 percent to $49.64, holding on to most of Wednesday's 1.8 percent gain.

Gold pulled back 0.15 percent to $1,238.55 an ounce on Thursday.

Reference: Nichola Saminather

Wednesday, 19 July 2017

Dollar weakness, China cheer lift Asia stocks, commodities


SYDNEY (Reuters) - The dollar huddled near multi-month lows on Wednesday as investors wagered any further tightening in the United States would be slow at best, while optimism on China's economy underpinned Asian shares and commodities.

The U.S. currency was still smarting after the collapse of the Republicans' push to overhaul healthcare dealt a blow to President Donald Trump's ability to pass promised tax cuts and infrastructure spending.

The diminished prospect of fiscal spending was a boon to bonds, especially as a run of soft U.S. inflation readings had lessened the risk that the Federal Reserve would need to be aggressive in removing its stimulus.

"The question marks over U.S. reform on the one hand, and the underlying economic growth momentum on the other hand are likely to keep the U.S. within its current goldilocks scenario for longer," wrote analysts at Morgan Stanley in a note.

"Globally, financial conditions tend to improve when the dollar is weak and vice versa," they added. "The falling dollar – still the globe's major reserve and funding currency – tends to see risk appetite flourishing."

As a result, yields on 10-year Treasury notes were down at 2.27 percent having fallen 12 basis points in little more than a week.

That in turn undermined the U.S. dollar which hit its lowest since September against a basket of currencies .DXY. It was a whisker firmer on Wednesday at 94.790, but still down over 7 percent on the year so far.

The euro was steady at $1.1535 EUR=, having made a 14-month top at $1.1583. Investors were wary of pushing the single currency too far in case a European Central Bank policy meeting on Thursday proved less hawkish than bulls were betting on.

The dollar also carved out a two-year low on the Australian dollar and a one-year trough on the Swiss franc.

Losses have been more limited against the yen as the Bank of Japan has stuck with its massive stimulus campaign and stopped yields there from rising. The dollar was trading at 112.12 JPY= on Wednesday, up from a low of 111.685.

Speculation that the Bank of England might soon tighten was also dealt a blow by surprisingly soft inflation figures at home, giving the dollar a leg up on the pound GBP=.

Remember China

In Asia, investor sentiment has also been supported by a raft of upbeat economic news out of China. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.55 percent at its highest since April 2015.

Shanghai's blue-chip CSI300 index, rose 1 percent and back toward an 18-month peak, while Australia's main index added 0.9 percent. The strength of the yen limited Japan's Nikkei .N225 to a rise of 0.1 percent.

In Europe, futures for the Eurostoxx 50  were up 0.3 percent, the DAX 0.2 percent and FTSE 0.3 percent. E-Mini futures edged up 0.1 percent.

Wall Street had ended Tuesday mixed after a heavy dose of corporate earnings, with the Dow dragged by Goldman Sachs (GS.N) but the Nasdaq reaching a record high.

The Dow .DJI fell 0.25 percent, while the S&P 500 .SPX gained 0.06 percent and the Nasdaq .IXIC 0.47 percent.

The Nasdaq's run of gains was saved by Netflix which jumped 13.5 percent on strong customer numbers. IBM (IBM.N), however, fell 2 percent after the bell when its revenue missed forecasts.

The drop in the dollar and optimism on Chinese demand helped underpin commodities, with everything from copper to iron ore on the rise. Spot gold also added another 0.1 percent to $1.243.36 per ounce

Oil prices eased after a rise in U.S. crude inventories and ongoing high supplies from producer club OPEC revived concerns of a supply overhang.

U.S. crude was last off 22 cents at $46.18 per barrel, while Brent dipped 21 cents to $48.63.

Reference: Wayne Cole