Monday, 30 April 2018

World stocks set for positive April as big ticket M&As return

SYDNEY (Reuters) - World stocks are set to notch up a positive month for the first time since January, as a slew of positive earnings from U.S. technology firms and marquee M&A deals help soothe memories of February tremors.

A seemingly successful Korean summit between the leaders of the North and South on Friday added the icing on the cake, pushing Asian bourses higher on Monday.

MSCI’s all-country index of global equities is up 1.3 percent for April ahead of another torrent of first quarter earnings, with Apple the standout report on Tuesday.

This after strong earnings reports from Facebook and Amazon gave tech stocks across the world a shot in arm last week.

Reports of large M&A deals, led by T-Mobile’s proposed merger with Sprint in the U.S. and the Sainsbury’s and ASDA merger in the UK, also kept global stock markets firmly in the spotlight.

“Large M&A news shows that confidence is there for making big deals. And while I would suggest not all of the recent deals are positive, the ASDA-Sainsbury’s one looks particularly good and the stock price reactions seems to bear that out,” said Michael Hewson, an analyst at CMC Markets.

Sainsbury’s shares shot up 20 percent at the open after the retailer agreed a 13.3 billion pound merger with Walmart’s ASDA, and the news shook up retail stocks in Europe.

Overall, the pan-continental STOXX index rose 0.1 percent while Germany's DAX gained 0.3 percent, buoyed by investors' improved risk appetite.

This after Asian shares extended gains on Monday as tensions in the Korean Peninsula eased and first-quarter earnings shone, although some investors were cautious about the outlook amid the backdrop of a simmering U.S.-China trade dispute.

MSCI’s broadest index of Asia-Pacific shares outside Japan climbed one percent, adding to a similar rise on Friday. The index is now poised for a modest rise this month after two consecutive losses.

South Korea's KOSPI index jumped 0.8 percent and is set to end April more than 2.5 percent higher following record profits from tech giant Samsung Electronics and after a successful inter-Korean summit.

On Friday, South Korean President Moon Jae-in and the North’s leader Kim Jong Un agreed to end hostilities and work toward “complete denuclearisation” of the Korean peninsula.

“The direction of travel is more positive that it was at the end of last year and geopolitics is now not the concern it was in the beginning of April,” said Hewson of CMC Markets.

“But the potential for trade wars would be the main issue for me going forward, that’s the clear and present danger and what effect it may have on oil prices,” he added.

Oil prices eased from recent highs with Brent crude futures off 94 cents at $73.70 a barrel, while U.S. crude lost 67 cents to $67.43.

The dollar meanwhile held steady just below its strongest level since mid-January against as basket of currencies as traders awaited U.S. consumer spending numbers to see whether the greenback can continue its recent run of gains.

The U.S. Federal Reserve is also due to meet this week, and while no rate hike is expected, investors will look for clues on the future pace of hikes.

“There might be a tweak to the inflation language acknowledging the move towards two percent on year-on-year inflation rather than ‘have continued to run below two percent’”, Deutsche Bank strategist Jim Reid said in a note.

The U.S. payroll number is also due Friday.

German inflation numbers are also set to be reported later on Monday, with investors expecting the continent’s largest economy to record consumer price rises of 1.6 percent.

The question is whether this will translate to a push for euro zone inflation towards the European Central Bank target of just below two percent.

Euro zone bond yields have remained well below the year’s highs. Germany’s 10-year government bond yield was up a basis point on Monday but still firmly below the 0.60 percent mark.

Reporting by Abhinav Ramnarayan

Draghi hails "solid" growth as ECB keeps policy on hold

FRANKFURT (Reuters) - European Central Bank chief Mario Draghi played down concerns over softness in the euro zone economy on Thursday as the ECB kept policy on hold, bolstering expectations that it will halt bond purchases by year-end.

Draghi argued that the 19-country currency bloc’s economy remained strong but acknowledged evidence of a “pull-back” from exceptional growth readings seen around the turn of the year.

“Overall, however, growth is expected to remain solid and broad-based,” he told a news conference after ECB policymakers held their meeting.

Draghi said risks related to the threat of protectionism had become “more prominent” but stressed the bank was confident that it was on the right track towards gradually weaning the economy off an unprecedented period of stimulus.

“The bottom line is ... caution in reading these developments, caution tempered by an unchanged confidence in convergence of inflation to our inflation aim,” he said.

The ECB targets inflation of below but close to 2 percent.

The euro rose 0.3 percent to $1.2197 as Draghi spoke.

“The main takeaway is that nothing has changed in the ECB’s policy stance and they remain on course to taper later in the year,” said Marchel Alexandrovich, European financial economist at Jefferies.

With the euro zone economy expanding for 20 straight quarters and millions of new jobs created, the main debate among policymakers is about how quickly to withdraw stimulus and preserve ECB firepower for the next downturn.

In particular, they need to agree an end-date for the ECB’s 2.55 trillion-euro ($3.10 trillion) bond purchase program, which has cut borrowing costs and revived growth, even if it has failed to lift inflation back to the target.

With that scheme due to expire in September, the ECB will have to decide in June or July whether to extend purchases or wind them down. But with the risk of a global trade war still looming, it may not make a decision until absolutely necessary.

Business sentiment has already taken a hit, particularly in export-focused Germany, and a full-fledged trade war could quickly hurt growth — a risk already highlighted by policymakers at the ECB’s March meeting.

Draghi said a range of one-off factors including cold weather, labor strikes and the timing of the Easter holiday period had contributed to weakness seen in a number of read-outs across the euro zone in recent weeks.

With Thursday’s decision, the ECB’s bond purchases, aimed at stimulating growth and inflation through rock-bottom debt costs, will continue at 30 billion euros a month at least until the end of September, or beyond if needed to prop up inflation.

The deposit rate, currently the bank’s primary interest rate tool, will remain at -0.40 percent. The main refinancing rate will stay at 0.00 percent.

Economists polled by Reuters ahead of the meeting expected bond purchases to end this year after a short taper and to see the first rate increase in the second quarter of 2019. Some, however, have started to flag risks of a delay.

Their 2018 growth forecasts were unchanged at 2.3 percent, but most economists polled said the trade dispute between the United States and China would also damage the euro zone economy.

One worry is that protectionist rhetoric from the United States could push down the value of the dollar, an economic anomaly as the Federal Reserve is likely to raise interest rates several times this year, a natural support for its currency.

While U.S. 10-year yields hit 3 percent this month for the first time since 2014, German yields now around 0.61 percent — have barely edged up this year, suggesting that any ECB normalization will be extremely slow.

A stronger euro would cap inflation, a headache for the ECB. Inflation is already set to miss the target, the central bank’s sole policy objective, for years to come.

Euro zone inflation is so weak that even after the creation of 9 million jobs since early 2013, measures of underlying price growth that strip out energy and food are barely rising.

This suggests the euro zone’s economic downturn was more severe than earlier thought and makes the recovery even more protracted.

The impact of the euro’s strength has been limited so far, however. The currency is up 1.5 percent against the dollar this year and just 0.3 percent higher on a trade-weighted basis.

Even if the currency impact were to bite, the ECB has little scope to extend purchases much longer, suggesting it will take an extremely cautious approach to normalizing policy, even if it risks erring on the side of caution and moving too late.

($1 = 0.8214 euros)

Reporting by Balazs Koranyi

Dollar below three-month highs as U.S. 10-year yield pulls back

SINGAPORE (Reuters) - The dollar held steady against a basket of major currencies on Monday after pulling back slightly from a 3-1/2-month high last week, pressured by a decline in the benchmark U.S. 10-year Treasury yield.

The dollar’s index against a basket of six major currencies stood at 91.561, steady on the day but down from Friday’s high of 91.986, its strongest level since Jan. 11.

The dollar index had risen more than 1.3 percent last week for its biggest weekly gain in over two months, after the U.S. 10-year Treasury yield rose above the psychologically key 3.0 percent threshold to four-year highs.

The U.S. 10-year yield has since come off that peak and fell 3 basis points on Friday to 2.957 percent, down from a four-year high of 3.035 percent struck on Wednesday.

Earlier this year, the correlation between U.S. yields and the dollar had broken down as investors focused more on trade frictions and geopolitical issues. Markets, however, have recently turned their attention back to interest rate plays as concerns over the U.S.-China trade dispute and tensions over North Korea’s nuclear program eased, giving the greenback a leg up.

The dollar inched up 0.1 percent to 109.12 yen, having set a 2-1/2 month high of 109.54 yen on Friday. But trade was thin with Japanese markets closed for a holiday.

The dollar has risen more than 2.6 percent against the yen in April, putting it on track for its best monthly performance since November 2016.

“The dollar has come a long way, and my sense is that it doesn’t have the strength to break above 110 yen for now,” said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.

At the same time, with concerns over geopolitical risks easing, the dollar’s downside risks against the yen also appear limited, Okagawa said, adding that the greenback was unlikely to fall back to the 107-yen handle in the near term.

Some analysts say moves among Japanese investors to increase their foreign currency exposure at the start of Japan’s new financial year have likely contributed to the yen’s weakness in April.

Another factor that is seen as having weighed on the yen recently is speculation about the potential for eventual yen-selling flows related to Japanese drugmaker Takeda Pharmaceutical’s $64 billion bid to buy London-listed Shire Plc.

Events and data coming up this week include the U.S. Federal Reserve’s May 1-2 policy meeting, at which the central bank is widely expected to keep interest rates unchanged, as well as U.S. jobs data due on Friday.

“This week’s U.S. non-farm payroll number will go a long way to cementing the dollar’s near-term trend,” Stephen Innes, head of trading in Asia-Pacific for Oanda in Singapore, said in a note.

In addition, a delegation of U.S. officials, including Treasury Secretary Steven Mnuchin and President Donald Trump’s top economic and trade advisers - Larry Kudlow, Robert Lighthizer and Peter Navarro - are all expected in China later this week for trade negotiations.

The euro held steady at $1.2125 EUR=, having recovered from a 3-1/2-month low of $1.2055 set on Friday.

Sterling eased 0.1 percent to $1.3780.

On Friday, the British pound had set a near two-month low of $1.3748 on Friday after Britain’s economy slowed far more than expected in the first quarter of 2018, slashing expectations the Bank of England will raise interest rates in May.

Reporting by Masayuki Kitano

U.S. derivatives regulator proposes more flexible swaps trading rules

WASHINGTON (Reuters) - The head of the U.S. derivatives watchdog on Thursday said he would like to allow more flexibility in the way swaps are traded while at the same time tightening requirements for reporting of such trades.

Christopher Giancarlo, chairman of the Commodity Futures Trading Commission (CFTC), said he fully supported swaps regulation introduced following the 2007-09 global financial crisis, but that the rules have had unintended consequences.

His proposals were unveiled as part of a 103-page policy blueprint for revising swaps rules brought into law by the 2010 Dodd-Frank Act.

Dodd-Frank introduced a range of trading, reporting, risk management and capital rules aimed at reducing risk in the U.S. derivatives market after Lehman Brothers fell into bankruptcy in 2008 due to exposures on its massive pile of swaps.

Giancarlo said while the law was sound, the CFTC’s implementation had been flawed in some cases.

Giancarlo, who was appointed chairman last year after having served as a minority commissioner, has for several years argued that the CFTC was wrong to impose an exchange-traded futures model on to the over-the-counter derivatives market.

“Upon becoming chairman, I thought it made sense to do a more comprehensive look at all the reforms, with a clear-eyed view toward what’s worked, and if it’s worked, what issues has it led to, what hasn’t worked as well, and what could we do better,” Giancarlo told reporters.

The CFTC’s swaps trading rules have caused liquidity to fragment globally, pushing price-discovery away from transparent exchange-type platforms, the policy paper argues. This could be fixed by allowing more flexible execution mechanisms.

Giancarlo, whose blueprint drew on new data, industry feedback and academic input from across the political spectrum, said his intention was not to weaken the current rules, but to strike a better balance between security and the vibrancy of the market.

“We’re not undoing it, we’re trying to improve it, we’re trying to optimize it,” he said.

The paper also recommends tightening up swaps data reporting requirements to provide more specific information on trades and their potential risks.

But it does declare Dodd-Frank’s mandate to push trades through clearing houses a big success, with many more trades now guaranteed in case either counterparty defaults.

Many of the changes outlined in Giancarlo’s blueprint would have to be voted on by the commission or, in some cases, taken up by the Federal Reserve or international regulators.

Reporting by Michelle Price

Friday, 27 April 2018

Confident Draghi lifts euro to day's highs; yields dip

LONDON (Reuters) - The euro held at the day’s highs on Thursday after ECB President Mario Draghi presented a relatively confident outlook for the euro zone economy, contrary to some expectations that he would take a more cautious stance after recent weak data.

After briefly falling to its lowest since mid-January at $1.2145 after the ECB’s decision to keep policy unchanged, the single currency rebounded and was trading up 0.3 percent at the day’s highs of $1.2210 after Draghi played down concern over recent softness in data.

“If anything, he is a tad more hawkish than forecasts and he does not strike as being particularly concerned with the level of the euro either,” said Neil Jones, head of hedge fund sales at Mizuho Bank Ltd in London.

Despite the euro’s bounce on Thursday, the single currency has trimmed its gains for the year to be up only 1.5 percent against the dollar compared to more than 4 percent since the start of 2018 due to a resurgent dollar and tepid European data.

But the currency's gains were largely marginal with core European bond yields dipping after Draghi acknowledged that measures of underlying inflation remained subdued.

“The main takeaway is that nothing has changed in the ECB’s policy stance and they remain on course to taper later in the year,” said Marchel Alexandrovich, European financial economist at Jefferies.

Euro zone bond yields were broadly lower after Draghi’s press conference, with benchmark German Bund yields down 2 basis points at 0.61 percent and below 6-week highs hit earlier this week.

Southern European government debt yields edged higher off the day’s lows as Draghi hailed solid growth in the bloc, though they were still lower 1-2 bps on the day.

Italian, Spanish and Portuguese government bonds are seen as beneficiaries of ECB monetary stimulus.

Euro zone stocks .STOXXE gave back some of their earlier gains, to trade up 0.4 percent as the euro gained. Euro zone banks gave back all their earlier gains to trade flat.

Reference: Saikat Chatterjee, Dhara Ranasinghe

Yuan recovers from one-month low as dollar's drive pauses

SHANGHAI (Reuters) - China’s yuan shook off a much weaker official midpoint and clawed back from a one-month low against the dollar on Thursday as the greenback paused after its recent rally.

The dollar was little changed near a 3-1/2-month high against a basket of currencies in Asian morning trade, bolstered by higher U.S. Treasury yields.

Prior to the market opening, the People’s Bank of China set the midpoint rate at 6.3283 per dollar, the weakest level since March 21 and 217 pips or 0.34 percent weaker than the previous fix of 6.3066.

In the spot market, the yuan opened at 6.3245 per dollar and fell to a low of 6.3275 at one point in morning trade, the softest level since March 23.

But it soon recouped losses and traded at 6.3238 at midday, 32 pips firmer than the previous late session close.

However, some analysts and market participants expect the yuan to come under renewed downward pressure if U.S. yields and the dollar continue to firm.

“Judging from the shrinking yield spread between the United States and China in last month, it no longer supports the yuan to strengthen further,” David Qu, markets economist at ANZ in Shanghai.

The global dollar index, a gauge that measures the greenback’s strength against six other major currencies, stood at 91.135 at midday, compared with previous close of 91.172. It rose to a high of 91.261 on Wednesday, its strongest since Jan. 12.

Separately, China resumed a key outbound investment scheme on Wednesday, granting qualified domestic financial institutions fresh quotas to buy overseas stocks and bonds for the first time since early 2015.

Market watchers said expansion of the outbound investment scheme should have limited impact on the yuan.

The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 98.38, firmer than the previous day’s 98.3.

The offshore yuan was trading 0.10 percent firmer than the onshore spot at 6.318 per dollar.

Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan’s value, traded at 6.424, 1.49 percent weaker than the midpoint.

One-year NDFs are settled against the midpoint, not the spot rate.

Reporting by Winni Zhou

Thursday, 26 April 2018

Asia stocks supported by Wall St., but China drags

TOKYO (Reuters) - Asian stocks were supported on Thursday by robust corporate earnings that helped Wall Street quell concerns about the surge in U.S. bond yields. However, sagging Chinese shares limited the upside potential of the market.

Spreadbetters expected European stocks to open higher off the back of firm U.S. stocks, pointing to a rise in Britain’s FTSE of 0.1 percent, an increase in Germany’s DAX of 0.4 percent and in France’s CAC of 0.4 percent.

The dollar hovered near 3-1/2-month highs against a basket of currencies, supported by the rise in U.S. long-term debt yields to a four-year peak.

South Korea’s KOSPI climbed 1.3 percent, with tech shares buoyed by news of a record quarterly profit from Samsung Electronics.

The region’s other gainers included Japan’s Nikkei, which rose 0.5 percent and Thai and Malaysian stocks.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.15 percent, as weaker Chinese stocks weighed on the market.

The benchmark Shanghai Composite Index fell 0.9 percent and the blue-chip CSI300 index dropped 1.4 percent as tech shares came under pressure following news that U.S. prosecutors have been investigating if China’s Huawei violated U.S. sanctions on Iran.

The Dow Jones Industrial Average rose 0.25 percent on Wednesday, ending five consecutive sessions of losses, and the S&P 500 gained 0.18 percent on optimism over a spate of upbeat earnings that managed to offset jitters about rising U.S. bond yields.

The rise in the 10-year U.S. Treasury yield to a four-year peak above 3 percent had weighed on stocks amid concerns higher costs to borrow could dampen corporate profits.

Nonetheless, the broader equity market reaction to the latest jump in U.S. yields appeared to be more measured compared to February, when a similar spike in rates sent stocks tumbling.

“The equity markets slid sharply in January and March in response to the rise in Treasury yields. But the Federal Reserve signaled in March that its rate hikes would be gradual,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.

“Expectations toward U.S. rate hikes being gradual are enabling equities to take the current yield rise in stride.”

The 10-year yield rose to 3.035 percent on Wednesday, its highest since January 2014. The yield has climbed on expectations of a steady U.S. economic expansion, accelerating inflation and concerns about increasing debt supply. It last stood at 3.031 percent.

U.S. yields have dragged up their European counterparts, with 10-year German bund reaching a six-week high of 0.655 percent and its British Gilt equivalent setting a nine-week peak of 1.57 percent this week.

The rise in borrowing rates has also supported the dollar. The dollar index of a basket of six major currencies was steady in Asia at 91.157 and within reach of 91.261, its highest since Jan 12 scaled on Wednesday.

The dollar has risen without pause through much of the past week, in part helped by an easing of concerns over a U.S.-China trade dispute.

The euro fetched $1.2175 after sliding to a 1-1/2-month low of $1.2160.

The immediate focus for euro traders is the European Central Bank monetary policy decision due at 1145 GMT. The ECB is widely expected to keep policy unchanged but its comments will be followed closely for any hints of when it might scale back its massive monetary stimulus.

“We expect no changes to the ECB’s setting of monetary conditions or its guidance. Some people in the market will be disappointed by that, but ECB President (Mario) Draghi has been starkly clear about the Governing Council’s position,” wrote Carl Weinberg, chief international economist at High Frequency Economics.

“Conditions prerequisite for a change in the central bank’s stance have not been met.”

The dollar was little changed at 109.340 yen after going as high as 109.490, its strongest since Feb. 8.

Crude oil prices were up amid the prospect of fresh sanctions on Iran and concerns about output from Venezuela.

Brent crude added 0.7 percent to $74.50 a barrel and U.S. crude futures were 0.55 percent higher at $68.42 a barrel.

Higher U.S. yields and a stronger dollar weighed on gold, with spot prices slipping to a five-week low of $1,318.51 an ounce overnight.

Reporting by Shinichi Saoshiro

Technology stocks hit as Wall Street turns lower

(Reuters) - U.S. stock indexes swung between gains and losses on Wednesday, as Boeing’s jump after upbeat results and outlook was negated by declines in technology stocks and rising U.S. bond yields.

Shares of the world’s biggest planemaker rose 2.8 percent after its profit jumped by more than half in the first quarter and the company raised its full-year forecasts for cash flow and earnings.

After Caterpillar spooked investors by warning about higher material costs on Tuesday, Boeing executives, on a post-earnings call noted that it was not seeing a material effect from raw material costs.

“With earnings reports that are coming out, the focus is on the forward guidance for where the interest rate environment is going,” said William Norris, chief investment officer at CIBC Bank USA.

“Investors are seeing a lot more cross-currents impacting the markets ... we knew that earnings were going to be very good and people are looking beyond the first quarter.”

The yield on 10-year U.S. Treasury notes, the benchmark for global interest rates, held above 3 percent after crossing the level for the first time in four years on Tuesday, stoking concerns about higher borrowing rates for companies.

Twitter, initially up 10 percent after a strong set of quarterly results, flipped to a 3 percent fall on the day. Scandal-hit Facebook which is set to report after market on Wednesday, was down 0.14 percent.

The CBOE Volatility index, a gauge of short-term stock market volatility jumped to more than 1-week high to 18.69 points.

At 11:28 a.m. ET, the Dow Jones industrial average was down 32.58 points, or 0.14 percent, at 23,991.55, the S&P 500 was down 1.31 points, or 0.05 percent, at 2,633.25 and the Nasdaq Composite was up 12.49 points, or 0.18 percent, at 7,019.84.

Reuters data shows that analysts are now estimating 22 percent profit growth in the first quarter among the S&P 500 companies, compared with 18.6 percent at the start of the earnings season.

Comcast rose 3.7 percent

Reference: Sruthi Shankar

Dollar edges up as U.S. yields poke above 3 percent to four-year highs

TOKYO (Reuters) - The dollar inched up on Wednesday, approaching its recent four-month high as the U.S. 10-year bond yield poked above 3 percent to hit its highest level since early 2014.

The dollar index against a basket of six major currencies rose 0.1 percent to 90.844. It had climbed overnight to 91.016, highest since Jan. 12, before a slide in Wall Street stocks tempered investor risk appetite and slowed the greenback’s rally against its peers, notably the yen.

The greenback had risen without pause through much of the past week as U.S.-China trade conflict woes receded and allowed the market to turn its attention back to dollar-supportive fundamentals, notably the surge by U.S. yields.

“Revived expectations that the U.S. economy would perform well thanks to tax cuts and increased fiscal spending are supporting the dollar,” said Shin Kadota, senior strategist at Barclays in Tokyo.

“Yields rose and equities slipped before but the situation is a little different, as expectations towards the U.S. economy are now stronger,” Kadota said.

Tuesday’s data on U.S. consumer confidence and new home sales, both stronger in April, bolstered the case that the world’s biggest economy will continue to grow in the coming quarters.

The U.S. currency was 0.1 percent higher at 108.900 yen. It pulled back from a 2-1/2-month high of 109.200 set the previous day when the S&P 500 and the Dow posted their biggest declines since April 6.

While the weakening by equities was supportive for the yen, often sought when stocks fall due to its perceived safe-haven status, analysts said the dollar was still likely headed for further gains in the longer-term.

“At first glance, the situation is similar to February, when U.S. yields rose sharply and equities tumbled. But the difference this time is that the response by equities is more measured, and yen demand stemming from ‘risk off’ is not nearly as strong,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities in Tokyo.

“The market’s attention is firmly back on interest rate differentials and this is likely to keep supporting the dollar going forward.”

The spreads between U.S. yields and those of its European and Japanese counterparts have widened significantly amid diverging monetary policy expectations.

This week the gap between U.S. and German 10-year government bond yields has hit its widest in 29 years and the U.S.-Japanese 10-year yield spread reached its broadest in nearly 11 years.

The 10-year Treasury yield extended its overnight rise and touched the four-year peak of 3.009 percent, reflecting the durability of the U.S. economic expansion. Accelerating inflation and concerns about increasing debt supply have also driven yields higher.

Wall Street dropped sharply on Tuesday as warnings by bellwether companies of higher costs stemming from the surge in yields reverberated.

The pound was effectively flat at $1.3981. It plumbed a one-month low of $1.3919 on Tuesday before rebounding 0.3 percent, seen to have been supported in part by news about a possible takeover of British pharmaceutical company Shire Plc by Japanese drugmaker Takeda Pharmaceutical Co.

The Australian dollar shed 0.2 percent to $0.7586 and in close reach of a four-month trough of $0.7576 plumbed the previous day.

The New Zealand dollar extended losses and dipped to $0.7102, its weakest since Jan. 4.

The kiwi, on track for its seventh session of losses, has slumped 2 percent this month.

The currency has faced pressure from a resurgent dollar and also by increasing expectations that the Reserve Bank of New Zealand would hold off from raising rates through 2018 after data last week showed the country’s inflation nearing the bottom of the central bank’s target.

Reporting by Shinichi Saoshiro

Wednesday, 25 April 2018

Sterling stuck near five-week lows as dollar bounces on yield rise

LONDON (Reuters) - Sterling fell against the dollar on Wednesday as the U.S. currency strengthened on the back of rising Treasury yields, while traders remained cautious ahead of British first-quarter economic growth numbers due on Friday.

The release will be the last key data issued before the Bank of England’s Monetary Policy Committee meeting early next month, and markets are split over whether the central bank will raise interest rates.

Governor Mark Carney dented confidence that a rate hike would happen when he said last week that Britain’s economic data was “mixed” and that there were several other MPC meetings later this year.

That sent sterling plummeting from post-Brexit vote highs and left it down for the month of April.

The pound did snap its losing streak and rise on Tuesday and overnight on news of a potentially positive M&A deal.

But with the dollar rebounding on Wednesday as the 10-year Treasury yield topped 3 percent, investors sold the pound.

“The price action today reflects more dollar strength than sterling weakness,” said Morten Helt, an FX strategist at Danske Bank, noting that the British currency had held up better against the euro in recent trading.

Helt said that, despite Carney’s comments, he still expected the BoE to hike rates as it followed the U.S. Federal Reserve in tightening policy and as it looked at the potential for a strong labour market to put upward pressure on inflation.

“We will have to see a very weak print (of GDP data on Friday) to delay a rate hike. We still believe in a rate hike and see sterling supported in the next few weeks.”

The pound fell 0.3 percent to $1.3938 (0.9996 pounds) as the dollar gained across most major currencies, and sterling was left close to a five-week low of $1.3919.

Sterling remains more than four cents off its post-Brexit vote highs of $1.4377 hit last week.

Some of those watching the market said the currency could fall further if more investors began to doubt a May rate hike.

“Slowing UK inflation and a cautious Mark Carney have forced investors to scale back expectations of a May rate hike. The pound, which remains extremely sensitive to monetary policy speculation, could depreciate further based on these factors,” said Lukman Otunuga, an analyst at FXTM.

Against the euro, which some analysts say is currently a better gauge, given that there has been considerable dollar-specific news this week, sterling gained 0.2 percent to 87.380 pence per euro.

Reporting by Tommy Wilkes

After Carney surprise, chance of May BoE rate hike down but not out

LONDON (Reuters) - Bank of England Governor Mark Carney surprised investors last week when he hinted that interest rates might not go up next month - but economists say it would be wrong to rule out an increase.

‘Forward guidance’ about central bank policy intentions was Carney’s signature policy when he arrived at the BoE from Canada in 2013. Yet even now, as he nears the end of his British sojourn, financial markets are still trying to figure him out.

“The Bank of England has been behaving like the Grand Old Duke of York,” said Lena Komileva, managing director of G+ Economics, likening Carney to the commander mocked in a British nursery rhyme for leading troops pointlessly up and down a hill.

Since the second half of last year, the BoE has warned that Britain’s economy is at risk of persistent inflation even as the approach of its exit from the European Union causes growth to lag that of other rich nations.

The BoE raised rates in November for the first time since 2007, and in February Carney and his fellow rate-setters said interest rates might need to rise slightly faster than the bank judged that markets were expecting.

In March, two members of the BoE’s Monetary Policy Committee voted for a rate rise and economists were confident an MPC majority would back a rise to 0.75 percent in May.

This all changed on Thursday when Carney alluded to “mixed data”, differences of opinion on the MPC and the possibility of rate rises later in the year in a BBC interview.

Sterling tumbled by more than a cent, short-dated bond yields recorded their biggest fall this year, and financial markets chopped the odds on a May rate rise to less than 40 percent from 65 percent before, according to Thomson Reuters calculations.

Investors should not lose track of the bigger picture, said Mike Amey, a fund manager at PIMCO, the world’s largest bond investor, as market pricing of the chance of a May move crept back up to around 50 percent.

“Whether they hike in May or not is an open question,” Amey said. “But we think the underlying momentum in the economy is holding up quite well, and therefore that in due course we will see higher rates than are currently priced in for the next couple of years.”

PIMCO expects BoE rates to rise once or twice both this year and next - compared with the single rate rises in November 2018 and August 2019 factored in by markets.

April purchasing managers’ surveys from British businesses will probably be more important for the BoE’s May decision than the weather-affected preliminary first-quarter gross domestic product figures on Friday, Amey added.

Overall, the economy has held up better than most economists expected after the June 2016 Brexit vote, despite lagging the global rebound. And the high inflation that hit consumer demand last year is slowing as sterling recoups some of its losses.

Unemployment has fallen to a 43-year low of 4.2 percent, and a record proportion of Britons are in work.

Komileva said she saw little case to delay a rate rise.

“If the Bank were to miss May, it would create serious questions about ... what it would take for them to move again,” Komileva said.

The BoE’s signals on rates felt more arbitrary than those of the U.S. Federal Reserve or the European Central Bank, she said.

Fed policymakers make individual projections for rates while ECB President Mario Draghi regularly offers hints on policy.

This is not the first time markets have been jolted by Carney. In 2013 the BoE linked policy to the jobless rate, only for unemployment to fall far faster than policymakers forecast. And in mid-2014 and mid-2015 Carney suggested rates might rise sooner than markets expected - only to backtrack both times.

Just two months ago, Carney had said he felt he could stop giving hints on rates because markets understood the BoE’s thinking well enough to draw their own conclusions.

After that, Brexit worries eased as Britain secured an outline Brexit transition deal until the end of 2020, and economists said signs of economic weakness were the result of freak snow storms, adding to the sense that another rate hike was coming.

The missing piece of the picture for the BoE is wage growth, the key factor for inflation pressure. At an annual 2.8 percent, wage growth is roughly in line with BoE expectations but remains weak by historic standards, especially given low unemployment.

Former BoE policymaker David Blanchflower thinks the central bank should hold off raising rates and look harder at the number of people in part-time work but who want to work longer hours, suggesting wages are unlikely to pick up sharply.

The BoE might feel it has more time to see if wages rise after a bigger-than-expected fall in inflation in March. Furthermore, sterling’s recent recovery should curb inflation pressures.

Even Michael Saunders - who voted for a rate rise last month and looks set to do so again - has said the muted response of wages to the fall in unemployment defied simple formulae.

For now, economists are still trying to gauge whether Carney’s comments were a warning that rates are unlikely to rise in May.

Alan Clarke at Scotiabank, who has dropped his forecast of a May rate rise, said they were probably intended to stop MPC members feeling they were committed to a hike next month.

Komileva said they might have the effect of dissuading wavering MPC members from backing a rate rise for fear of wrong-footing markets again.

But HSBC economists Simon Wells and Elizabeth Martins - who for now are holding with their view of a May rate rise - said they would take the comments with a grain of salt.

“Not reacting to every word the BoE utters has been a good strategy recently. We stick to this.”

Reference: David Milliken

Asian shares rattled by rising U.S. yields, cost worries

TOKYO (Reuters) - Asian shares fell on Wednesday as a rise in U.S. bond yields above 3 percent and warnings from bellwether U.S. companies of higher costs drove fears that a boom in corporate earnings may be near its peak.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS dropped 0.3 percent, hitting their weakest in almost three weeks, with tech-heavy Taiwan shares .TWII slipping to two-month lows on worries about slowing semi-conductor demand. Japan's Nikkei dropped 0.2 percent.

European shares are expected to fall, with spread-betters calling a 0.7 to 0.9 percent drop in Britain's FTSE, Germany's Dax and France's Cac.

S&P E-mini futures ESc1 slipped 0.2 percent. Wall Street shares skidded overnight, with the S&P 500 .SPX slumping 1.34 percent, the most in two-and-a-half weeks.

Industrial heavyweight Caterpillar beat earnings estimates due to strong global demand but its shares tumbled 6.2 percent after management said first-quarter earnings would be the “high water mark” for the year and warned of increasing steel prices.

“We’ve seen quite a lot of companies announcing above-estimate earnings and their shares falling sharply,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

Fujito noted major financial shares such as Goldman Sachs and Citigroup as well as Google parent Alphabet, the first major tech firm to report earnings, have followed a similar pattern.

Corporate earnings are in solid shape, with analysts estimating 21.1 percent growth in the Jan-March quarter among U.S. S&P500 firms, according to Thomson Reuters data. A similar trend is expected globally.

“If shares are falling when corporate earnings are rising 20 percent and the economy is growing at 3 percent, the market is in trouble. The market reaction so far feels as if we are starting to see an end of its long rally since 2009. Investors could be thinking that the best time will be soon behind us,” he said.

Creeping gains in U.S. Treasury yields are fuelling fears that portfolio managers may move money into safer fixed-income securities at the expense of riskier assets like stocks and emerging markets.

The 10-year yield, a benchmark for global borrowing costs, has been driven steadily higher by a combination of concerns over inflation, growing debt supply, and rising Federal Reserve borrowing costs.

The 10-year U.S. Treasuries yield rose to as high as 3.009 percent. A break of its January 2014 high of 3.041 percent could turn investors even more bearish.

Fed Funds rate futures prices have been constantly falling this month, pricing in a considerable chance of three more rate hikes by the end of this year.

The impact is already reverberating in many emerging markets, with JPMorgan’s emerging market bond index  hitting a two-month low.

In Indonesia, a market with one of the largest exposures to foreign portfolio holdings, the authorities have been intervening heavily to put a floor under the rupiah, which has been flirted with two-year lows.

The Indian rupee hit a 13-month low.

“Higher yields are no doubt having a negative impact on emerging markets. We are likely to see outflows from emerging market bonds,” said Takahiko Sasaki, market economist at Mizuho Bank.

The dollar also gained a tad against major currencies.

The euro stood at $1.2226 EUR=, not far from Tuesday's low of $1.2182, a low last seen on March 1.

The dollar traded at 108.87 yen JPY= after having jumped to a 2-1/2-month high of 109.20 yen on Tuesday.

The Australian dollar fell 0.4 percent to a four-month low of $0.7572.

Against a basket of major currencies, the dollar index edged up 0.2 percent.

Oil prices were stable, but were below the more than three-year highs reached the previous session as rising U.S. fuel inventories and production weighed on an otherwise bullish market.

Brent fetched $73.86 a barrel, little changed on the day. On Tuesday it rose to $75.47, its highest since November 2014. West Texas Intermediate  crude traded flat at $67.68.

Reorting by Hideyuki Sano

Tuesday, 24 April 2018

Dollar, euro hold after U.S. 10-year yield hits 3 percent

NEW YORK (Reuters) - The U.S. dollar and euro were largely unchanged on Tuesday morning as the 10-year Treasury yield broke through the psychologically significant barrier of 3 percent.

The dollar index hit a three-month high of 90.985 against a basket of six currencies in morning trade, though the big gains on rising U.S. government bond yields mostly occurred yesterday.

“Yesterday was a big day in terms of Treasury yields impacting currencies. Today, the 10-year did claw its way up to 3 percent to no big effect as far as currencies are concerned,” said Alan Ruskin, global head of currency strategy at Deutsche Bank in New York.

Greenback gains on Tuesday drove the euro down slightly past the two-month low hit yesterday, on growing concerns that firmer U.S. Treasury yields would reduce incremental demand for the region’s bonds and stocks at a time when hedge funds have amassed record long bets in the single currency.

But after Monday’s sizeable fall, the euro looked buoyant on Tuesday, remaining well above the annual low reached in early January.

“Today we stalled at key levels, most obviously vis-à-vis the euro, which looks relatively resilient,” said Ruskin.

The U.S. 10-year Treasury yield rose above 3 percent on Tuesday for the first time in more than four years as investors reduced their U.S. bond holdings on worries about rising inflation and growing government debt supply. The 10-year reached a top of 3.003 percent, above yesterday’s close at 2.973 percent.

Some lingering worries that European Central Bank policymakers may signal a more cautious stance at a policy meeting on Thursday also pulled the single currency lower.

“We think the euro’s weakness may be overdone as despite the U.S. Treasury yield spike theme reverberating in the markets over the last 24 hours, the U.S. economy is very much in the late stages of its economic cycle and a cautious ECB meeting is baked into markets,” said Christin Tuxen, an FX strategist at Danske Bank in Copenhagen.

The single currency EUR= stabilized around $1.22 on Tuesday after having plumbed to a low of $1.2185 in the Asian session, its lowest since March 1. It has fallen 3 percent from a 2018 high above $1.2550 in mid-February.

The dollar set a 2-and-a-1/2 month high of 109.17 yen JPY= and was holding near those levels.

The rise in U.S. bond yields has dented emerging market currencies and bond markets, including those in Asia.

Higher U.S. yields can put pressure on the currencies of emerging market countries that run current account deficits such as Indonesia and India, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.

A stronger dollar also intensified pressure on some commodity-linked currencies such as the Australian dollar AUD= which tumbled 0.4 percent to 0.7577 per dollar, its lowest since Dec. 13.

Reporting by Kate Duguid and Saikat Chatterjee

Scalping: Small Quick Profits Can Add Up

An Educational article

Scalping is a trading style specializing in taking profits on small price changes, generally soon after a trade has been entered and has become profitable. It requires a trader to have a strict exit strategy because one large loss could eliminate the many small gains that the trader has worked to obtain. Having the right tools, such as a live feed, a direct-access broker and the stamina to place many trades is required for this strategy to be successful.

Scalping is based on an assumption that most stocks will complete the first stage of a movement (a stock will move in the desired direction for a brief time but where it goes from there is uncertain); some of the stocks will cease to advance and others will continue. A scalper intends to take as many small profits as possible, not allowing them to evaporate. Such an approach is the opposite of the "let your profits run" mind-set, which attempts to optimize positive trading results by increasing the size of winning trades while letting others reverse.

 Scalping achieves results by increasing the number of winners and sacrificing the size of the wins. It's not uncommon for a trader of a longer time frame to achieve positive results by winning only half or even less of his or her trades - it's just that the wins are much bigger than the losses. A successful scalper, however, will have a much higher ratio of winning trades versus losing while keeping profits roughly equal or slightly bigger than losses.

The main premises of scalping are:
Lessened exposure limits risk - A brief exposure to the market diminishes the probability of running into an adverse event.
Smaller moves are easier to obtain - A bigger imbalance of supply and demand is needed to warrant bigger price changes. It is easier for a stock to make a 10 cents move than it is to make a $1 move.
Smaller moves are more frequent than larger ones - Even during relatively quiet markets there are many small movements that a scalper can exploit.
Scalping can be adopted as a primary or supplementary style of trading.

Primary Style
A pure scalper will make a number of trades a day, between five and 10 to hundreds. A scalper will mostly utilize one-minute charts since the time frame is small and he or she needs to see the setups as they shape up as close to real time as possible. Quote systems Nasdaq Level II, Total View and/or Times and Sales are essential tools for this type of trading. Automatic instant execution of orders is crucial to a scalper, so a direct-access broker is the preferred weapon of choice.

Supplementary Style
Traders of other time frames can use scalping as a supplementary approach in several ways. The most obvious way is to use it when the market is choppy or locked in a narrow range. When there are no trends in a longer time frame, going to a shorter time frame can reveal visible and exploitable trends, which can lead a trader to scalp.

Another way to add scalping to longer time-frame trades is through the so-called "umbrella" concept. This approach allows a trader to improve his or her cost basis and maximize a profit.

Umbrella trades are done in the following way:
A trader initiates a position for a longer time-frame trade.
While the main trade develops, a trader identifies new setups in a shorter time frame in the direction of the main trade, entering and exiting them by the principles of scalping.

Practically any trading system, based on particular setups, can be used for the purposes of scalping. In this regard, scalping can be seen as a kind of method of risk management. Basically, any trade can be turned into a scalp by taking a profit near the 1:1 risk/reward ratio. This means that the size of the profit taken equals the size of a stop dictated by the setup. If, for instance, a trader enters his or her position for a scalp trade at $20 with an initial stop at $19.90, then the risk is 10 cents; this means a 1:1 risk/reward ratio will be reached at $20.10.

Scalp trades can be executed on both long and short sides. They can be done on breakouts or in range-bound trading. Many traditional chart formations, such as a cups and handles or triangles, can be used for scalping. The same can be said about technical indicators if a trader bases decisions on them.

Three Types of Scalping
The first type of scalping is referred to as "market making," whereby a scalper tries to capitalize on the spread by simultaneously posting a bid and an offer for a specific stock. Obviously, this strategy can succeed only on mostly immobile stocks that trade big volumes without any real price changes. This kind of scalping is immensely hard to do successfully as a trader must compete with market makers for the shares on both bids and offers. Also, the profit is so small that any stock movement against the trader's position warrants a loss exceeding his or her original profit target.

The other two styles are based on a more traditional approach and require a moving stock where prices change rapidly. These two styles also require a sound strategy and method of reading the movement.

The second type of scalping is done by purchasing a large number of shares that are sold for a gain on a very small price movement. A trader of this style will enter into positions for several thousand shares and wait for a small move, which is usually measured in cents. Such an approach requires highly liquid stock to allow for entering and exiting 3,000 to 10,000 shares easily.

The third type of scalping is the closest to the traditional methods of trading. A trader enters an amount of shares on any setup or signal from his or her system, and closes the position as soon as the first exit signal is generated near the 1:1 risk/reward ratio, calculated as described earlier.

The Bottom Line
Scalping can be very profitable for traders who decide to use it as a primary strategy, or even those who use it to supplement other types of trading. Adhering to the strict exit strategy is the key to making small profits compound into large gains. The brief amount of market exposure and the frequency of small moves are key attributes that are the reasons why this strategy is popular among many types of traders.

Reference:  Vadim Graifer

Monday, 23 April 2018

Sterling stuck at two-week low as investors cautious over May rate hike

LONDON (Reuters) - Sterling slipped to a two-week low against the dollar on Monday as investors questioned whether the Bank of England would raise interest rates in May following weaker-than-expected economic data and cautious comments from governor Mark Carney.

The pound has been one of the best performing major currencies in 2018 and last week surged to its highest level since the Brexit referendum in June 2016.

But weaker-than-expected wage growth and inflation, and comments by Carney that the data was “mixed” hit the currency hard, sending it down almost 1.7 percent for the week as investors rushed to price in the possibility the BoE could delay raising rates until later in the year.

Analysts on Monday said they would watch gross domestic product figures due later in the week for signs of how the economy was holding up and whether it pointed to a BoE ready to hike rates.

“We think the UK data this week may be enough to rekindle rate hike expectations,” said ING FX analyst Viraj Patel.

But he cautioned that politics could impact sterling this week if a cross-party and non-binding technical vote on Brexit on Thursday threatened Prime Minister Theresa May’s leadership.

The pound traded flat at $1.3997, after earlier hitting a 2-1/2 week low of $1.3984, as broad dollar strength kept the pound under pressure.

Against the euro, the pound recovered and rose 0.3 percent to 87.515 pence.

A seasonal rise in capital inflows into Britain from foreign companies paying UK shareholders dividends has boosted sterling during April in recent years.

Economists, almost all of whom had predicted the BoE would act in May before Carney’s Thursday interview, believe the central bank’s vote on rates next month will now be very close.

Berenberg economists said that because of an acceleration in nominal wages and above-trend real GDP growth they expected four 25 basis point hikes over the next two years, with two increases each in 2018 and 2019.

Reporting by Tom Finn

Wall Street set to open higher despite rising U.S. yields

(Reuters) - Wall Street was set for gains on Monday as optimism about the strong earnings season helped ease concerns on rising U.S. bond yields.

The yield on 10-year U.S. Treasuries, the benchmark for global borrowing costs, hit 2.9980 percent, its highest since January 2014. The U.S. five-year inflation swap, a key market gauge of long-term U.S. inflation, hit its highest level in 3-1/2 years.

The last time 10-year Treasury yields neared 3 percent, in 2013, it rocked risk appetite and sent stocks sliding and was shortly before oil prices went on a mighty 75 percent tumble. More recently, the stock market sold off in February as inflation expectations sent treasury yields surging.

But analysts say that strong earnings could help investors overlook such concerns at least for the moment.

“Earnings are going to be the bigger factor, the increase in yields isn’t too excessive just yet and investors maybe willing to take it in stride,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

“We came into the earnings season with pretty lofty expectations and the earnings have been relatively strong.”

The prospect of rising inflation comes as U.S. companies are reporting results for what is turning out to be a much stronger-than-expected first quarter.

Profits at S&P 500 companies are expected to have risen 20 percent in the quarter, according to Thomson Reuters I/B/E/S, making it the strongest quarter in seven years.

At 8:44 a.m. ET, Dow e-minis1 were up 47 points, or 0.19 percent. S&P 500 e-minis  were up 5.75 points, or 0.22 percent. Nasdaq 100 e-minis were up 27.75 points, or 0.42 percent.

This week, 181 S&P 500 companies are scheduled to report including some of the technology heavy-hitters like Facebook, Microsoft, Amazon and Intel . Alphabet reports after markets close on Monday.

Shares of Hasbro fell 5.9 percent in premarket trading after the toymaker reported a bigger-than-expected drop in quarterly revenue, blaming the liquidation of Toys ‘R’ Us.

Caterpillar rose 1.4 percent Citigroup upgraded to “buy”, saying the stock could outperform over the next six to 12 months.

In a move that could ease tensions between the United States and China, U.S. Treasury Secretary Steven Mnuchin said on Saturday he may travel to China to try to resolve the differences over trade.

Reporting by Sruthi Shankar

Crypto trading tumbles as investment scramble unwinds

LONDON (Reuters) - Trading activity on cryptocurrency exchanges has halved from its December peak, industry data shows, as retail interest in the virtual coins declines and the prices of many remain far below their recent highs.

Average daily traded volumes across cryptocurrency exchanges fell to $9.1 billion in March and to $7.4 billion in the first half of April, compared to almost $17 billion in December, according to data compiled by crypto analysis website CryptoCompare.

Rocketing prices of digital currencies such as bitcoin fueled a mania in the sector towards the end of 2017 as retail investors across the globe scrambled to get a piece of the action. That triggered regulatory warnings and threats to crack down on the market.

China, a major market, has shut down local cryptocurrency trading exchanges.

Since peaking in December and January, bitcoin's price has more than halved, while the second and third largest cryptocurrencies, ethereum .MVETH and Ripple's have lost even more of their value.

But crypto-trading volumes in March and April have only fallen back to their levels of November. They remain as much as 25 times above their levels of March-April last year.

“Volumes are down because there was a hype cycle in December on the back of futures products coming to market. You’ll find that most of that was retail-driven, with Korea and Japan as major instigators,” said Charles Hayter, London-based CryptoCompare’s co-founder.

“The governments have now dampened some of that irrational exuberance.”

People involved in the industry say trading activity outside of exchanges, on over-the-counter markets, where larger institutional investors tend to trade, has held up far better.

Major exchanges with drops of more than half in daily traded volumes between December and March include Bitfinex, San Fransisco-based Coinbase, Luxembourg-based Bitstamp and Poloniex, which was recently bought by Goldman Sachs-backed cryptocurrency start-up Circle.

A person close to Bitstamp said volumes were directly related to overall interest in cryptocurrencies, but that the exchange had maintained its market share between December and April. The other exchanges did not respond to requests for comment.

The slump in trading volumes will be seized on by critics of digital currencies as a further indication they are a giant Ponzi scheme that is now unravelling.

But people active in the industry say short-term price and trading swings are to be expected for a highly disruptive technology, and that true believers in the power of digital currencies will remain invested for the long-haul.

“The crypto market ... is set to soar over the next few years and beyond, as more and more investors appreciate the fundamentals,” said Nigel Green, CEO of deVere, a financial consultancy which operates a crypto exchange app.

“Whether traditionalists like it or not, the clock on digital currencies isn’t going to be turned back.”

Not all of the falls in trading volumes can be explained by weaker investor appetite.

Restrictions in countries like China will have hit exchanges used heavily by Chinese investors disproportionately, while other trading platforms may have been given a boost by the listing of new cryptocurrencies during the year.

Many new exchanges have also opened, taking market share from older platforms.

Some like OKEx and Huobi have grown their volumes since December despite the broader decline, with March among their strongest months to date.

The data compiled by CryptoCompare covers most of the biggest exchanges and the company said it added new exchanges to its database as and when their volumes hit significant levels.

Other data providers may have slightly different ways of calculating volumes, particularly when one cryptocurrency is traded against another rather than against government-backed fiat currencies like the U.S. dollar.

Some exchanges in Japan, one of the biggest markets for crypto investment, do not provide trading volume data.

Reporting by Tommy Wilkes

Wall Street falls on investor nerves about interest rates, tech

NEW YORK (Reuters) - Wall Street’s three major indexes declined on Friday as investors worried about a jump in U.S. bond yields, with technology stocks leading the decline on nerves about upcoming earnings reports and iPhone demand.

The technology index was the biggest drag on the S&P 500 with a 1.5 percent drop after registering three straight days of losses ahead of a key earnings week for the sector.

“There continues to be some concern over interest rates and their potential impact on equities. There’s also been a little bit of a lack of momentum in this earnings period,” said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.

“It’s not that earnings weren’t good enough but company forecasts often weren’t strong enough to make the market continue to rise,” he said.

The Dow Jones Industrial Average fell 202.09 points, or 0.82 percent, to 24,462.8, the S&P 500 lost 22.98 points, or 0.85 percent, to 2,670.15 and the Nasdaq Composite dropped 91.93 points, or 1.27 percent, to 7,146.13.

Despite Friday’s decline the S&P eked out a gain of 0.5 percent for the week to show its second weekly gain in a row.

Equity investors were jittery as the 10-year Treasury yield reached its highest level since January 2014 as a bond selloff continued for a second day, driving the yield curve steeper after two weeks of flattening.

Benchmark 10-year notes last fell 12/32 in price to yield 2.9583 percent, from 2.914 percent Thursday.

When yields are high, investors favor bonds over equities including sectors such as consumer staples and real estate, which promise high dividends and slow, predictable growth. But high interest rates can boost bank profits so the financial sector managed to show a 0.05 percent gain, making it the best performer out of the S&P’s 11 industry sectors.

The consumer staples sector .SPLRCS was the biggest percentage decliner with a 1.7 percent fall, led by PepsiCo.

“We’re seeing a follow through from yesterday’s action when the key was weakness in consumer staples. We came to this earnings season with very optimistic expectations and we’re seeing some very fundamental bottoms up issues at these companies,” said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

Procter & Gamble fell 2.9 percent on top of a 4.2 percent drop the day before when it said shrinking retailer inventories and higher costs squeezed its margins.

Philip Morris International also had a second day of declines after getting crushed due to weak shipment volumes in its quarterly report.

Apple fell 4.1 percent, making it the biggest drag on the major indexes after Morgan Stanley estimated weak demand for its latest iPhones, a day after Taiwan Semiconductor raised fears of softer smartphone sales.

Alphabet, Facebook, Intel and Microsoft are among the major technology companies reporting next week.

S&P 500 companies are expected to report their strongest first-quarter profit gains in seven years. Of the 87 companies that have reported so far, 79.3 percent have topped profit expectations, according to Thomson Reuters I/B/E/S.

Declining issues outnumbered advancing ones on the NYSE by a 2.05-to-1 ratio; on Nasdaq, a 1.68-to-1 ratio favored decliners.

The S&P 500 posted 12 new 52-week highs and 22 new lows; the Nasdaq Composite recorded 54 new highs and 51 new lows.

On U.S. exchanges 6.45 billion shares changed hands compared to the 6.92 billion average for the last 20 trading days.

Reporting by April Sinéad Carew and April Joyner

Sunday, 22 April 2018

Swiss franc dips to three-year low, more losses seen

LONDON/ZURICH (Reuters) - The Swiss franc fell to a three-year low of 1.20 against the euro on Thursday as a revival in risk appetite encouraged investors to use it to buy higher yielding assets elsewhere, betting on loose monetary policy keeping the currency weak.

The currency weakened past the level which was defended by the Swiss National Bank (SNB) during the brief era of its currency peg with the euro, which was abandoned in January 2015.

There is little expectation, that Switzerland will follow its European counterparts in tightening monetary policy, and hence boost the franc, anytime soon.

“The franc remains overvalued even by the SNB’s measures, and we are seeing an extended compression of peripheral bond yields to core European debt, signalling that risk appetite remains strong, which is pressuring the franc lower,” said Luc Luyet, currency strategist at Pictet Wealth Management.

This year the franc has weakened more than 2.5 percent, with much of the decline coming in April.

Some traders cited Russian tycoons targeted in new U.S. sanctions pulling money out of Switzerland to send it home as another factor pressuring the franc.

And as policymakers have signalled more comfort with the currency’s weakness, investors have taken to ramping up bets against the franc with the size of such trades swelling to $1.4 billion (986.61 million pounds), according to positioning data from CFTC.

Morgan Stanley strategists expect the franc to trade below 1.20 in the coming days as the SNB will remain “accommodative” with inflation still far below a 2 percent target.

SNB Chairman Thomas Jordan has said it is too early to change course and the currency situation remained “fragile”. The bank declined to comment on Thursday’s fall.

Investors are using the franc as a borrowing currency to buy into higher yielding assets. The gap between peripheral bonds spreads and benchmark issuer Germany has tightened significantly this year amid ratings upgrades and brighter growth prospects.

The Italian/German 10-year yield gap was at 117 basis points on Thursday – its tightest since August 2016 while the Spanish/German yield spread is close to its tightest in a decade.

Even on a long term historical average, the Swiss franc remained at the upper ranges on trade-weighted valuation metrics despite its recent fall, according to Thomson Reuters data.

The drop in the franc pushed bond yields higher as investors anticipated likely higher inflationary pressures emerging from the feedback from a weaker currency.

Benchmark 10-year yields rose to 0.12 percent – their highest since mid March while two-year bond yields rose to their highest levels since the start of the year, rising to minus 0.767 percent.

A strong franc weighs on Switzerland’s export-reliant economy, so the drop was welcomed by business leaders.

“The weakening of the franc to 1.20 is very welcome,” said Hans Hess, president of industry association Swissmem.

“This is extremely helpful for the bottom line of companies who export into the euro zone. They have had a really tough time in the last few years, and a lot of them have cut their costs and investments to the bone to remain competitive.”

Reporting by Tom Finn

Friday, 20 April 2018

Euro stumbles at $1.24 level as yield rise supports dollar

LONDON (Reuters) - The euro briefly flirted with $1.24 on Thursday but a rise in long-term U.S. bond yields supported the dollar and pushed the single currency further back into its recent trading range.

Given the scale of gains in the 10-year Treasury note yield, which climbed more than 5 basis points overnight for its biggest one-day surge since March 2, the dollar’s strength was limited.

The modest moves underlined investor caution and that a rally in the euro, which gained at the start of this year, has run out of steam. Investors are growing nervous that the euro zone economy’s rebound is nearing the top and the European Central Bank may move more slowly to tighten monetary policy.

Broad uncertainty stemming from U.S. President Donald Trump’s trade and economic policies, as well as geopolitical events in the Middle East and elsewhere has meanwhile weighed on the dollar.

“There is no real impulse from monetary policy. There is a little bit of fatigue with the trade war issue and the global economic cycle is losing momentum, especially in the euro zone whereas the U.S. is holding up,” said Christin Tuxen, an FX strategist at Danske Bank.

The euro fell 0.1 percent to $1.2365 after earlier hitting $1.24. The dollar index, measuring the U.S. currency against a basket of currencies, traded flat at 89.644.

Tuxen remains bullish on the euro, seeing the single currency rise towards $1.30 in 12 months but said in the short-term the euro could fall as the ECB, which meets next week, takes more time in raising rates.

With the U.S. Federal Reserve tightening, diverging interest rate views have driven the spread between U.S. and German 10-year government bond yields above 230 basis points, the highest since late December 2016.

The euro had weakened to a 14-year low the last time the yield spread was at the current width. But it has been relatively immune to the current yield spread widening. The spread has increased more than 30 basis points over the past three months, but the common currency has moved within a relatively narrow $1.2556-$1.2154 range.

“While we have been arguing that the dollar will take its cue from the U.S. economic cycle – irrespective of what the Fed does – we do believe that the outlook for global asset prices in general now rests on what U.S. monetary officials choose to do next,” ING analysts said.

The Swiss franc fell to within a whisker of the 1.20 per euro mark it last hit in January 2015 - before the Swiss National Bank removed its currency peg and the franc shot up.

Expectations the SNB will refrain from reining in its balance sheet even when the ECB acts has pushed the franc lower. The franc touched 1.9999 francs per euro earlier on Thursday before recovering to 1.1977.

Turkey’s lira, one of the worst performing currencies in recent months, fell after rallying more than 2 percent against the dollar overnight after President Tayyip Erdogan called early elections for in June, more than a year earlier than planned.

Erdogan’s early election call was seen by some market players as recognition of the need for tighter monetary policy to combat inflation.

The lira fell 0.5 percent at 4.0285 against the dollar. Wednesday's surge moved it significantly away from a record low of 4.194 set last week.

A rally in commodity prices, including large moves in oil and iron ore, helped the Australian dollar rise even after disappointing jobs data. The Aussie dollar was up 0.1 percent at $0.7793, having recovered from a low of $0.7765.

Reporting by Tommy Wilkes

Sterling extends slide after Carney punctures BoE rate hike bets

LONDON (Reuters) - Sterling extended its drop to a two-week low against the dollar on Friday after Bank of England Governor Mark Carney signalled that the central bank may not rush to raise interest rates in May because economic data was “mixed”.

Investors had this week bid up the pound, one of the best performing major currencies in 2018, to its highest level since the Brexit referendum in June 2016, in part because of growing expectations the BoE would increase rates next month to curb inflation.

But weaker than expected wage growth and inflation data this week encouraged Carney to tell the BBC on Thursday that the rate rise was far from certain and noting that there were other BoE meetings later in the year.

“Carney has moved the goalposts,” said Jane Foley, an FX strategist at Rabobank. “The data from the UK has shown signs of weakness. There are signs we could be losing momentum.”

Foley said Carney was correct to have cautioned the market but his comments raised questions about the BoE’s forward guidance in February when it had signalled a rate rise was coming soon, and this underlined that investors should see rate moves as contingent on economic data.

The pound fell as much as 0.3 percent to a day's low of $1.4037 GBP=D3, its lowest since April 6.

On Thursday, sterling slid close to 1 percent and the British currency is now down 1.35 percent for the week, barely holding on to gains for April, a month which is considered to be seasonally strong for the British currency.

Against the euro, however, sterling recovered slightly on Friday and traded up 0.1 percent at 87.58 pence per euro.

A seasonal rise in capital inflows into Britain from foreign companies paying UK shareholders dividends has boosted sterling during April in recent years.

Analysts said some speculative money had probably bet on that pattern repeating itself, and investors were now unwinding those positions, pushing the currency lower.

Hedge funds had amassed a $3.8 billion long bet on the sterling, its longest since June 2014, according to latest positioning data.

Michael Saunders, a member of the BoE’s rate-setting Monetary Policy Committee who voted for a rate rise last month, said on Friday that rate increases should be gradual and not glacial.

Markets are pricing in a 45 percent chance of a 25 basis point rise in May, down from a near 70 percent chance before Carney spoke.

“Sensitivity to monetary policy speculation is likely to remain a key fundamental theme impacting the British Pound. If market expectations continue to deteriorate over higher U.K interest rates, sterling could be exposed to further downside risks,” said Lukman Otunuga, research analyst at FXTM.

Economists, almost all of whom had predicted the BoE would act in May before Carney’s Thursday interview, believe the vote on whether to increase rates next month will now be very close.

Progress during the next round of negotiations between Britain and the European Union over their divorce will also influence the pound.

Reporting by Tommy Wilkes

Thursday, 19 April 2018

Dollar rises as risk appetite returns, investors turn to data

LONDON (Reuters) - The U.S. dollar clung to gains on Wednesday after rising from a three-week low as fading concerns about a trade war fed broader appetite for risk-taking among investors.

U.S. markets were buoyed by strong corporate earnings and that helped European equities on Wednesday as investors focused on economic data and put to one side worries about a global trade war.

Markets in Asia picked up on a positive finish in the United States and were helped by China’s decision to cut bank reserve requirements by 100 basis points for some commercial banks.

“Concerns about military action in Syria, trade tensions between the U.S. and China and the pace of rate hikes in the U.S. have abated somewhat,” Commerzbank economist Michael Schubert said in a note.

The dollar index against a group of six major currencies traded flat at 89.490

The dollar was helped by a weakened pound which fell to a four-day low on Wednesday after British inflation unexpectedly cooled to a one-year low in March.

The data has raised doubts over a near consensus view that the Bank of England will raise interest rates next month.

Euro zone data also came in weaker than expected as investors looked for signs of the viability of further European central bank monetary tightening.

The dollar has found support from economic indicators recently as perceived political risks recede, with Western strikes on Syria not expected to escalate.

The dollar rose 0.3 percent to 107.280 yen JPY= buoyed as improving risk appetite reduced demand for its Japanese peer, a currency often sought in times of market turmoil and political tensions.

But caution over U.S.-China trade tensions continued to linger in the background, confining currencies to narrow ranges.

“Over the last couple of days there have been few incendiary tweets from the U.S. or China to unsettle markets further. So the markets are turning a bit more risk-on but there’s always the fear of what comes next,” said Berenberg economist Florian Hense.

The euro was up 0.1 percent at $1.2387 EUR=.

The common currency rose to a three-week high of $1.2414 on Wednesday but slipped on a ZEW research institute survey showing German investor morale reached its lowest since November 2012.

The pound was down 0.5 percent at $1.4229 after it was nudged away from a post-Brexit referendum 22-month high of $1.4377 on Tuesday by weaker-than-expected British wage data.

Markets were still pricing in a more than even chance the Bank of England will hike interest rates in May, expectations of which have helped sterling advance aggressively this month.

The Canadian dollar was up 0.2 percent at C$1.2581 per dollar and in reach of a seven-week high set the previous day ahead of the Bank of Canada's interest rate decision later on Wednesday.

While the BoC is not expected to raise rates this time, expectations have risen that the central bank will tighten policy as early as next month given strong data. Investors will be looking for any hints that could reinforce such views.

Elsewhere, the Swiss franc fell to its lowest versus the euro since the Swiss National Bank scrapped its currency peg in January 2015.

Reference: Tom Finn

Currency trading volumes hit record highs in first quarter

LONDON (Reuters) - Foreign exchange trading volumes rose to a record high in the first three months of the year, data showed on Thursday, as a rise in volatility from multi-year lows encouraged more buying and selling of currencies.

The numbers released by CLS, a major settler of trades in the foreign exchange market, follows a huge surge in trading on Thomson Reuters’ trading platforms, with its March volumes up 28 percent on last year and narrowly below February’s, its best ever month.

The rise in FX volumes will be welcomed by trading platforms and banks that have struggled with calm financial markets squeezing their profits in recent years.

Wall Street banks Goldman Sachs and Morgan Stanley this week reported a jump in first-quarter profits thanks to a surge in trading activity, although Morgan Stanley executives warned results through the rest of the year may not be quite as strong.

After volatility spiked during a sudden sell-off across financial markets in January and February, price swings have returned to lower levels, with price moves in the biggest currencies notably small.

Market participants say April has been a quiet month so far, with currencies mostly shrugging off rising geopolitical tensions, concerns about a possible U.S.-China trade war and the prospect a global economic growth boom is nearing its peak. Key currency pairs remain stuck in narrow price ranges.

“FX markets are in a wait-and-see mode,” Thu Lan, an FX analyst at Commerzbank in Frankfurt said. “Everyone is waiting to see the first (monetary policy) normalization steps from central banks.”

Trading of emerging market FX, particularly the Russian rouble after the announcement of new U.S. sanctions targeting Russian companies and oligarchs, may have held up better in April but these currencies are traded in far lower volumes than the ‘G10’ currencies like the U.S. dollar, euro and Japanese yen.

CLS said in a statement that the average daily traded FX volumes submitted to it reached $1.87 trillion between January and March, surpassing a previous high of $1.67 trillion in the first quarter of 2013.

Daily volumes in March reached $1.855 trillion, down 4.8 percent on February but up on a year earlier.

As well as volatility, CLS attributed the rise in volumes to a trend of more buy-side firms like asset managers using its services.

Average daily volumes of spot and derivatives currency trading touched $461 billion in March, slightly lower than the record month of February when volumes hit $463 billion, Thomson Reuters said.

NEX Group, which owns another big FX trading platform, saw average daily foreign exchange spot trading volumes rise 7 percent to $92.7 billion in March from the previous year. Trading of fixed income products rose even more.

Reporting by Tommy Wilkes

Wednesday, 18 April 2018

Falling UK price data sends sterling to four-day low

LONDON (Reuters) - Sterling hit a four-day low on Wednesday after British inflation cooled unexpectedly, raising concerns that the Bank of England might not implement further increases to interest rates after next month’s expected hike.

A May increase to interest rates is already firmly baked into market expectations and a recent string of strong data and a Brexit transition agreement has prompted suggestion that the central bank will follow up with another increase in November.

Wednesday’s official data, however, showed annual consumer price inflation fell to 2.5 percent in March, down from 2.7 percent in February and below economists’ expectations, casting doubt over those bets.

“Sterling has fallen against the dollar, not because an imminent interest hike has been called into question – this now seems all but assured – but rather because today’s data casts doubt over the likelihood of a further rate hike in November,” said Jake Trask, a forex research director at OFX in London.

The British currency slid 0.8 percent to $1.4173 in London trading, its lowest since last Thursday and a striking reversal from Tuesday climb to $1.4377, its strongest since the Brexit referendum.

Growing bets of more rate increases have boosted sterling in recent weeks, taking it to the top of the league tables as the best-performing G10 currency with a 5 percent gain this year.

The Bank of England will raise its key interest rate to 0.75 percent in May, said nearly all of 76 economists polled by Reuters, with another 25 basis point rise expected just before Britain is due to leave the European Union early next year.

Against the euro, sterling weakened 0.6 percent to 86.45 pence.

Britain's internationally exposed FTSE 100 index, extended gains to a session high after the UK inflation data and was last up 0.7 percent.

British government bond prices surged after the data, pushing two-year yields down 6 basis points on the day to a two-week low of 0.830 percent, while 10-year yields  dropped by 5 basis points to 1.387 percent. December short sterling interest rate futures rose 4 ticks on the day to a four-week high.

Euro zone bond yields extended their falls after the UK inflation numbers as British gilt yields tumbled.

Reporting by Saikat Chatterjee

World stocks near four-week highs, Morgan Stanley shines

LONDON (Reuters) - Global stocks climbed to a near four-week high and Wall Street geared up for a strong open on Wednesday as powerful U.S. first-quarter earnings, notably from Morgan Stanley, helped revive risk appetite.

MSCI’s index of world stocks was up 0.3 percent at 1203 GMT, while the top index of euro zone stocks rose 0.3 percent, having touched its highest since Feb. 5, when a spike in volatility amplified a sell-off in global equity markets.

S&P 500 futures sparked higher, rising 0.4 percent by 1203 GMT as investors digested the latest batch of U.S. results with Morgan Stanley shining.

The bank’s shares climbed in pre-market trading after a record jump in quarterly profits, up 40 percent thanks to a strong trading boost.

It kept the pace set by Goldman Sachs which reported a surge in profits on Tuesday, also driven by a sharp increase in trading as market volatility rose.

Analysts have downgraded their European earnings estimates ahead of the first-quarter results season, while U.S. companies are expected to deliver stellar results.

Investors were watching Europe’s earnings season for signs of strain from a stronger euro, with Continental providing an early indication the currency’s rise was hurting exporters.

The tyre maker fell 4.3 percent, driving a pullback in Germany’s DAX, after a negative hit to earnings from exchange rates forced it to lower its outlook.

But a fall in the S&P 500 volatility gauge reflected investors’ renewed confidence in the resilience of equity markets. The VIX edged down, near a six-week low.

“Volatility has come down because expectations are very strong for the earnings season and the market is happy to see some hard data,” said Laurent Godin, equity analyst at Indosuez Wealth Management.

Britain’s FTSE 100 stood out with much stronger gains. It was up 0.9 percent after an unexpected fall in British inflation to a one-year low dented the pound — good news for its high percentage of overseas revenue earners.

While investors were refocusing on fundamentals after weeks dominated by geopolitical tensions, the latest Bank of America Merrill Lynch survey of fund managers showed signs of caution.

Investors cut their equity allocation to an 18-month low and increased their cash balances.

“Just like they were chasing the market up in January, investors have gradually started to sell,” said Clark Fenton, chief investment officer at Agilis Investment Management.

“I think that gives the market scope to rally a bit more as positioning has lightened up.”

Fund managers named the threat of trade war as the biggest “tail risk” in BAML’s survey, while they were less concerned about inflation causing convulsions in bond markets.

Monetary tightening, proceeding at a different pace on either side of the Atlantic, was making its mark on bond markets.

The gap between U.S. and German two-year bonds reached its widest in nearly 30 years, reflecting the diverging monetary policy outlook.

“In some ways I am sort of surprised that it hasn’t mattered more,” said Agilis’ Fenton, referring to the trans-Atlantic divergence. “I would have thought it would have helped European equity prices more on a relative basis.”

The U.S. yield curve - the gap between U.S. 2-year and 10-year government bond yields — flattened back slightly, having fallen to a low of 41.8 basis points overnight.

“I would worry if [the curve] got inverted. It’s probably a bit premature to get too bent out of shape about it now,” said Fenton.

The rise in short-dated yields has pushed the real yield on U.S. two-year Treasuries above the S&P 500 dividend yield for the first time in 10 years.

Currency market movements, outside of a sliding sterling, were restrained.

The euro was stuck at $1.2362, after topping out at $1.2413 overnight, while the dollar index hovered at 89.5.

The yen pulled back to 107.23 against the dollar, pushed down by signs of progress in talks between South and North Korea.

Strong metals prices, boosted by supply concerns after U.S. sanctions on Russian aluminum giant Rusal, helped send Europe’s basic resources stocks surging 2.1 percent.

Oil prices also continued their relentless rise.

Brent crude futures were up 86 cents at $72.44 a barrel, while U.S. crude rose 95 cents to $67.48 a barrel.

Reporting by Helen Reid