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Friday, 20 October 2017

Stocks stumble after all-time high, kiwi takes a dive


LONDON (Reuters) - World stocks set a fresh record high before stalling in Europe on Thursday, as the longest winning streak for Japanese stocks since 1998 and the first close above 23,000 for Wall Street’s Dow index helped to offset nerves in Spain.

The Nikkei enjoyed its 13th straight daily rise, helping the MSCI index of global stock markets - now up 17.6 percent for the year - add to its long list of record highs.

It wasn’t all one-way traffic, though.

European shares took their biggest tumble in almost two months after a new batch of third-quarter results brought some disappointments, notably from Anglo-Dutch consumer goods titan Unilever, French advertising group Publicis and Germany’s Kion.

They then took another lurch lower as signals emerged from Spain that Madrid was gearing up to invoke a never-before-used clause to re-impose central rule over the restive region of Catalonia.

The euro trimmed gains that had taken it to a three-day high against the dollar, while Spanish bond markets gave up their early morning gains.

“Everyone is watching this with great interest but it just looks like a standoff,” said Saxo Bank FX strategist John Hardy, saying the situation was something of a ‘catch-22’ for Catalonia.

A declaration of independence would see it lose its prized autonomy ,while calling a regional election could mobilise Catalan voters who would prefer to stay part of Spain.

“But the market is not expressing any real fear over this and I think that is justified,” Hardy added.

The other big currency market move came from the New Zealand dollar. It was sent skidding to its lowest since May after the left-leaning Labour Party won the support of the minor nationalist New Zealand First party to form a ruling coalition.

It ended weeks of political guessing games but fanned concerns that the Labour Party’s hardline policies on immigrants and foreign ownership could hurt investor sentiment.

The New Zealand dollar slid as much as 1.4 percent to $0.7047, which as well as the 4-1/2 month low was also the biggest percentage decline since November 2016.

CHINA FOCUS

Among the other headlines, China’s economic growth cooled slightly to 6.8 percent in the third quarter from a year earlier, from the second quarter’s 6.9 percent.

A modest loss of momentum had been expected as the government reins in the heated property market and cracks down on riskier lending.

Other data showed that China’s industrial output rose a stronger-than-expected 6.6 percent in September, while retail sales also outperformed. Property sales fell though for the first time in over two years.

The Chinese yuan and stocks eased, with Shanghai falling 0.4 percent.

“The GDP reading could weigh negatively on both mainland stocks and currency markets as traders may position for further weakness into year-end, suspecting financial curbs will continue to have a negative impact on growth in China,” said Stephen Innes, head of Asia-Pacific trading at OANDA in Singapore.

The dollar index against a basket of six major currencies was broadly steady at 93.340.

The index ended a four-session winning run overnight on lacklustre U.S. data but briefly resumed its climb after the 10-year Treasury yield spiked 4 basis points with safe-haven bond prices falling on better investor risk appetite.

The dollar was little changed at 112.940 yen after climbing 0.6 percent overnight. The euro nudged up 0.15 percent to $1.1802.

The term of current Fed Chair Janet Yellen’s expires in February and investors are keen to see whom U.S. President Donald Trump will pick as her replacement. The White House said Trump would announce his decision in the “coming days”.

In commodities, Brent crude oil futures dropped 1.2 percent to $57.43 a barrel and U.S. WTI dropped 1.5 percent.

Brent had risen to a three-week high of $58.54 a barrel on Wednesday on worries about tensions in Iraq and Iran, but lost steam after a surprising drop in U.S. refining rates and an unexpected build in fuel stocks signalled slower demand in the world’s top oil consumer.

Reporting by Marc Jones

Thursday, 19 October 2017

Dollar firms to two-week high versus yen, bolstered by rising U.S. yields


TOKYO/SINGAPORE (Reuters) - The dollar hit its highest in about two weeks against the yen on Thursday, supported by this week’s rise in U.S. bond yields, with the market’s attention turning to who will next lead the Federal Reserve and this weekend’s Japanese election.

The dollar index, which tracks the U.S. currency against a basket of six major rivals, was slightly higher on the day at 93.389

The dollar rose as high as 113.095 yen JPY= in early Asian trade, its strongest level since Oct. 6. The dollar last changed hands at 112.97 yen, steady from late U.S. trade on Wednesday.

This week’s rise in U.S. bond yields helped lend support to the greenback. The two-year U.S. Treasury yield rose to its highest since November 2008 on Wednesday on the back of expectations for tighter global monetary policy.

The benchmark U.S. 10-year Treasury yield touched a one-week high of 2.352 percent on Wednesday, and last stood at 2.342 percent, having risen six basis points so far this week.

“In order for expectations of tighter U.S. monetary policy to increase, we will need to see more evidence to confirm that U.S. inflation is rising,” said Kumiko Ishikawa, FX analyst at Sony Financial Holdings in Tokyo.

The dollar’s rise against the yen was likely to be capped by uncertainty ahead of this weekend’s election in Japan.

Most polls show Japanese Prime Minister Shinzo Abe’s coalition on track to secure a roughly two-thirds majority in Sunday’s general election, ushering in continued political and monetary stability.

“To be sure, the chances of an election surprise in Japan are indeed very small. But investors remember last year’s Brexit vote and the U.S. presidential election, so there is greater uneasiness around elections now,” Ishikawa said.

With the Federal Reserve expected to raise interest rates for the third time this year in December, markets are now looking for clarity on who will lead the U.S. central bank after Fed Chair Janet Yellen’s term expires next February.

President Donald Trump will announce his decision on who will be the chair of the Federal Reserve in the “coming days,” White House spokeswoman Sarah Sanders said on Wednesday.

Trump has an interview scheduled on Thursday with current Chair Yellen. She is one of five candidates Trump is considering for the job.

The dollar has gained a boost this week after Stanford University economist John Taylor emerged as a major candidate for the next Fed chair.

“If it turns out to be Taylor, that is likely to trigger selling of (U.S.) bonds, at least initially,” said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.

The dollar could edge higher against the yen under that scenario, Okagawa added.

Taylor is known as a proponent of a rule-based monetary policy and according to his formula, known as the Taylor rule, the Fed funds rate needs to be much higher than the current target of 1.0-1.25 percent.

Thus there is speculation that the Fed may start raising interest rates at a faster pace, if Taylor becomes the Fed chief.

The euro edged up percent to $1.1799 EUR=.

One focus for the euro is the European Central Bank’s policy meeting coming up nex0.1t week.

France’s central bank governor called on Wednesday for a reduction in the ECB’s bond purchases towards “their possible end” in light of stronger inflation, while saying monetary policy should stay easy.

Easy monetary policy gives euro zone governments a window of opportunity to enact the reforms needed to boost growth once interest rates have to rise, ECB President Mario Draghi said on Wednesday.

The Australian dollar edged higher after Australian jobs data for September came in stronger than expected.

The Australian dollar rose 0.1 percent to $0.7850 AUD=D3, pulling away from Wednesday's intraday low of $0.7819.

Against the yen, the Australian dollar rose to 88.87 yen AUDJPY=R at one point, its highest level since late September.

Economic data from China was largely in line with expectations. The Australian currency is sensitive to China developments because of the two countries’ massive trade relations.

China’s economic growth slowed slightly as expected in the third quarter as the government’s efforts to rein in the property market and debt risks tempered activity in the world’s second-largest economy.

In other data, China’s industrial output rose a stronger-than-expected 6.6 percent in September from a year earlier, while retail sales also outperformed, though investment growth eased more than expected and property sales fell for the first time in more than two years.

Reference: Lisa Twaronite

Wednesday, 18 October 2017

Asia shares camp near peaks, China's Xi talks reform and stability


SYDNEY (Reuters) - Asian shares consolidated recent gains and currencies kept to tight ranges on Wednesday as the opening of China’s Communist Party conference produced more in the way of aspirational politics than concrete policies.

The twice-a-decade congress is expected to cement the power of President Xi Jinping, who kicked off the week-long event with a wide-ranging speech in which he said the market would be allowed to play a decisive role in allocating resources.

Yet he also said the role of the state in the economy had to be strengthened.

SPONSORED

Investors are keen for clear direction on economic and financial market reform over the next five years, but history suggests these events can be light on detail.

China's blue-chip CSI300 index added 0.5 percent in reaction, while Shanghai stocks rose 0.3 percent.

“Market participants are paying much more attention to the party congress this time, as they are watching if any surprise reforms will emerge amid concerns over economic growth,” said Yan Kaiwen, analyst with China Fortune Securities.

On Tuesday, the United States again declined to name China as a currency manipulator although it remained critical of the Chinese government’s economic policies ahead of a planned visit to Beijing by President Donald Trump.

Recent economic data from the Asian giant has been generally upbeat, fuelling a tide of optimism about global growth that has benefited shares across the region.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was steady near their highest since late 2007, while South Korea .KS11 was just off a record top.

Japan's Nikkei .N225 added 0.2 percent and was trying hard to string together a 12th straight session of gains.

An opinion poll by Kyodo showed Japanese Prime Minister Shinzo Abe’s coalition was on track for a roughly two-thirds majority in Sunday’s general election there.

The bullish mood on equities was evident in the latest fund manager survey from BofA Merrill Lynch.

“For the first time in six years, Goldilocks trumps secular stagnation, with a record high 48 percent of investors surveyed expecting above-trend economic growth and below-trend inflation,” the survey found.

BEARISH ON BONDS

Investors were bearish on bonds with 82 percent of those surveyed expecting yields to rise in the next 12 months and a record 85 percent believing bonds were overvalued.

Yields on two-year U.S. Treasury paper have hit their highest since November 2008 amid speculation President Trump could chose a more hawkish leader to replace Federal Reserve Chair Janet Yellen.


The shift upward in yields lifted the dollar to a one-week top against a basket of currencies and nudged it up 0.1 percent on the yen to 112.29

The euro was holding at $1.1765, still some way above the recent low and major chart support at $1.1667.

Dealers were wary ahead of speeches by several policymakers from the European Central Bank due later on Wednesday, which includes President Mario Draghi.

The biggest mover had been Mexico's peso which boasted its biggest rise in over four months after trade ministers from the United States, Canada and Mexico extended the deadline on a contentious round of talks.

On Wall Street, the Dow had ended Tuesday up a slim 0.18 percent having briefly broken above the 23,000-point mark for the first time on Tuesday, while the S&P 500 .SPX gained 0.07 percent and the Nasdaq  dipped 0.01 percent.

Shares in IBM jumped nearly 5 percent after hours as a shift to newer businesses such as cloud and security services helped it beat Wall Street’s quarterly revenue estimates.

In commodity markets, talk of higher U.S. interest rates kept gold pinned down at XAU= $1,284.81 an ounce.

Oil prices got a boost from a drop in U.S. crude inventories and concerns that tensions in the Middle East could disrupt supplies. Brent crude futures LCOc1 firmed 34 cents to $58.22 per barrel, while U.S. crude gained 18 cents to $52.06.

Reference: Wayne Cole

Sterling tumbles as markets digest BoE talk


LONDON (Reuters) - Sterling slipped below $1.32 for the first time in four days on Tuesday after comments by Bank of England policymakers were interpreted by markets as broadly dovish.

The British pound fell half a percent on the day to as low as $1.3192, while ten-year benchmark bond yields fell 3 basis points to 1.31 percent, the lowest since Sept. 19.

“Comments coming out uniformly signalled a dovish and cautious stance among policymakers and indicated a growing debate internally on the path for interest rates forward,” said Neil Jones, Mizuho’s head of currency sales for hedge funds in London.

Members of the Bank of England’s interest-rate-setting committee were speaking to parliament’s Treasury Committee. For highlights, see

Silvana Tenreyro, external member of the monetary policy committee, said the upward pressure on inflation from sterling weakness will start to wane in the coming months.

Earlier on Tuesday, official data showed Britain’s inflation rate hit 3 percent, above the BoE’s 2 percent target but in line with expectations.

Much of the increase however has been caused by the fall in the value of the pound since last year’s Brexit vote which is likely to be a temporary driver of price increases.

Despite the drop in bond yields and sterling, market expectations from futures and swaps were broadly unchanged with interest rate markets still expecting about two rate hikes over the next twelve months.

Britain’s FTSE 100 - whose international focus tends to make it negatively correlated with sterling - rose slightly to a session high, up 0.2 percent.

Sterling was also the biggest mover in the crosses with the British currency declining against the Australian dollar and the Japanese yen.

Reference: Reuters

Tuesday, 17 October 2017

Dollar edges up as Fed leadership speculation sends up U.S. yields


TOKYO (Reuters) - The dollar edged up against its peers on Tuesday, supported by a rise in Treasury yields following a report that U.S. President Donald Trump was favoring a policy hawk as the next head of the Federal Reserve.

Treasury yields bounced from two-week lows and rose after a report on Monday that President Trump was favoring Stanford economist John Taylor, seen as more hawkish than current Chair Janet Yellen, to head the Fed.

“Taylor’s mention came as a surprise as he was lower on the list of rumored Fed chief candidates including (Fed governor Jerome) Powell, (former Fed governor Kevin) Warsh, Yellen and (Trump’s top economic advisor Gary) Cohn,” said Shin Kadota, senior strategist at Barclays in Tokyo.

“However, it is also being reported that Trump will meet Yellen on Thursday. News regarding the Fed chairmanship is in constant flux and the market finds it hard to move significantly in either direction until some clarity is established.”

Trump will meet Yellen on Thursday as part of his search for a new candidate for her position, a source familiar with plans for the meeting said.

The dollar index inched up 0.05 percent against a basket of six major currencies  to 93.365 after rising 0.25 percent overnight.

The index had stooped to a 17-day low of 92.749 on Friday in the wake of disappointing U.S. inflation data.

“The dollar was under pressure as Treasury yields declined last week. But it was allowed to rebound as a stronger Wall Street, good U.S. data, and the report about Taylor all came into place to stop the yield decline,” said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo.

The New York Fed’s business conditions index published on Monday showed its highest reading since September 2014.

“The euro likely holds the key to whether the dollar can remain firm. The European Central Bank is now considered less hawkish than the market had initially thought last month, pushing German bund yields lower and in turn favoring the dollar against the euro,” Ishikawa at IG Securities said.

Ten-year bond yields in Germany hit one-month lows overnight, extending moves seen late last week on reports that ECB policymakers broadly agree on extending asset purchases at a lower volume at their Oct. 26 meeting, with views converging on a nine-month extension.

The greenback was 0.1 percent lower at 112.070 yen after rising 0.3 percent overnight, when it pulled away from a three-week low of 111.650.

The euro dipped 0.15 percent to $1.1780 after losing 0.25 percent the previous day.

The Australian dollar was 0.15 percent lower at $0.7840 as its rally last week to a two-week high of $0.7898 on upbeat Chinese data lost momentum.

Sterling slipped 0.1 percent to $1.3241, awaiting Bank of England Governor Mark Carney's comments due later in the session for potential cues.

Reference: Shinichi Saoshiro

Monday, 16 October 2017

China data boosts world stocks and commodities, oil jumps


LONDON (Reuters) - World stocks and commodities rose on Monday, boosted by upbeat Chinese data, while U.S. oil futures jumped to a near six-month high as an escalation in fighting between the Iraqi government and Kurdish forces threatened supply.

Asian shares rallied to a decade high after figures showed China’s producer prices beat market expectations to rise 6.9 percent in September from a year earlier.

Copper hit three-year highs. Prices of iron ore and coke, key ingredients in steel-making, jumped with Dalian iron ore futures, rising 2.5 percent to a 2-1/2 week high while coke for January delivery gained 1.6 percent.

Oil prices also jumped, pushed up as Iraqi forces entered the oil city of Kirkuk, taking territory from Kurdish fighters.

U.S. crude rose 1.3 percent to $52.12 a barrel, not far from $52.85 touched late last month - a level not seen since April. Brent crude climbed 1.5 percent to $58.03 per barrel.

MSCI’s broadest index of Asia-Pacific shares outside Japan gained for a fifth day running to its highest level since late 2007.

Japan's Nikkei climbed for a sixth day to a level not seen since November 1996. Australian shares extended their winning streak to a fourth straight session to rise 0.6 percent, while South Korea's stock index set a new record. Wall Street was set to open higher.

Upbeat data from China came before the Communist Party Congress on Wednesday and third-quarter economic data on Thursday. Figures showed China’s producer prices beat market expectations to rise 6.9 percent in September from a year earlier.

“What has helped risk appetite this morning is that the Chinese inflation data suggests the world’s second biggest economy is doing much better than people expected this time a year ago for 2017,” said Michael Hewson, chief markets analyst at CMC Markets.

“When we’ve got palladium prices at their highest levels since 2001, oil prices edging higher, copper edging higher - it’s not doing anything to undermine the perception that the global economy is actually doing fairly ok.”

The IMF last week upgraded its global economic growth forecast for 2017 by 0.1 percentage points to 3.6 percent, and to 3.7 percent for 2018, from its April and July outlook, driven by a pickup in trade, investment, and consumer confidence.

Forecasts for the euro zone, Japan, China, emerging market Europe and Russia were all revised upwards.

CATALAN UNCERTAINTY

Uncertainty over Catalonia failed to put a significant dent in European stocks, although Spain lagged the broader index.

The pan-European STOXX600 added 0.2 percent, while Spain's IBEX fell 0.7 percent.

The MSCI world equity index, which tracks shares in 47 countries, was up 0.1 percent, fuelled by the earlier gains in Asia and those in Europe.

Catalonia worries also pushed up the yield on Spain’s 10-year government bond. The gap between Spanish and German 10-year borrowing costs widened 2.5 basis points.

Catalan leader Carles Puigdemont failed on Monday to clarify whether he had declared independence from Spain last week, paving the way for the central government to take control of the wealthy region.

“Further gains in Asia and the relentless march higher in US equities have provided the impetus for European equity markets to push forward – despite Carles Puigdemont’s failure to provide a Yes or No response to whether Catalonia has declared independence,” said Rebecca O‘Keeffe, head of investment at Interactive Investor.

In Austria, conservative Sebastian Kurz is on track to become the next leader after Sunday’s election. He is seen as likely to seek a coalition with the resurgent far right because his party is far short of a majority.

The developments threaten to disrupt a move by German Chancellor Angela Merkel and French President Emmanuel Macron to draw up a roadmap to deeper European Union integration.

The euro took a knock for the third straight day on the uncertainty, falling 0.2 percent to $1.1801.

The dollar index, which measures the greenback against a basket of currencies, was 0.1 percent higher at 93.172 .DXY.

Gold was up 0.1 percent at $1,305.37 per ounce.

Reference: Ritvik Carvalho

Euro falters after biggest weekly rise in month as ECB eyed


LONDON (Reuters) - The euro edged lower on Monday after posting its biggest weekly loss in a month though prices clung to well worn trading ranges before a central bank meeting next week where policymakers are set to unveil a plan to roll back its record stimulus policies.

With political uncertainty in the form of Catalonia’s bid for independence and Austria’s election outcome having a very muted impact on the currency relative to the bond markets, investors moved to the sidelines to focus on economic data.

“It is all over to the ECB now and Catalonia and Austria are being discounted as local problems rather than regional concerns,” said Thulan Nguyen, a currency strategist at Commerzbank in Frankfurt.

The single currency fell 0.1 percent to $1.1814 but was hemmed in a tight 0.3 percent range. It rose 0.8 percent last week, its biggest weekly rise in a month, according to Thomson Reuters data.

Catalan authorities must drop a bid for independence by Thursday, the Spanish government said, moving closer to imposing direct rule over the region after its leader missed an initial deadline to back down.

Despite a raft of euro negative news in recent weeks, the euro has remained broadly stable against the dollar and even chalked up gains against sterling and other currencies, indicating some buying from institutional investors.

Long euro positions rose for a third consecutive week to more than $14.47 billion, its biggest in more than five years, according to Commodity Futures Trading Commission data released last week.

“ECB expectations will be the main driver and we see the overall trajectory of the euro higher, though there may be some consolidation after the heavy buying in recent weeks,” said Manuel Oliveri, an FX strategist at Credit Agricole in London.

But the euro’s losses have been limited thanks to a broadly muted dollar as subdued inflation data raised expectations the U.S. Federal Reserve will not strike an overtly hawkish tone at its policy meeting at the end of the month.

Although U.S. consumer prices rose the most in eight months in September, as gasoline prices soared in the wake of hurricane-related refinery disruptions, underlying inflation remained muted.

The dollar index was flat at 93.11, lacking momentum after falling last week.

Reference: Saikat Chatterjee