DJ App Dow Jones Newswires , 28 April 2017 04:28
European Morning Briefing: Inflation Data in Focus
Stocks seen flat; EUR/USD 1.0867-70; German 10-Year bund yield 0.299%; Brent crude $51.79; gold $1265.70
-UK Consumer Sentiment Fell Slightly in April
-Japan Core Inflation Maintains Same Pace in March, Industrial Output Falls
-Japan Retail Sales Rise 2.1% in March
Watch For: Eurozone HCPI; France GDP, consumer spending and CPI; Germany retail sales; Italy CPI; Spain GDP and retail sales; earnings from Rexel
The European Union's first estimate of the annual rate of inflation for April is expected to record a partial rebound after a surprisingly large drop in March. Economists expect the headline rate to come in at 1.8%, still below the European Central Bank's target.
Given the increased stress policy makers have placed on underlying pressures, the core measure may prove more significant, with economists expecting to see a rise in that to 1% from 0.7% in March.
U. K. consumer sentiment weakened slightly in April, as British shoppers remained concerned about their own financial situation as well as the country's economic prospects over the year ahead, a survey showed Friday.
The long-running barometer of consumer confidence, conducted for the European Union's executive by market researchers GfK U.K., fell to minus 7 in April, down 1 point from the previous month.
This was in line with the expectations of economists polled by The Wall Street Journal.
Japanese prices rose at a slower-than-expected rate in March amid persistent sluggishness in consumption, casting further doubt over the direction of inflation just a day after the Bank of Japan lowered its price forecast for the year started April.
The core consumer price index rose 0.2% from a year earlier in March, matching the pace of the previous month, according to data released Friday by the Ministry of Internal Affairs and Communications. Core prices exclude fresh food. Economists polled by the Nikkei had expected a 0.3% increase.
Japanese retail sales rose in March, as improved fuel and auto sales outweighed weaker spending on textiles.
Retail sales rose 2.1% from a year earlier in March, following a revised 0.2% increase in February, according to data released Friday by the Ministry of Economy, Trade and Industry. After seasonal adjustment, retail sales rose 0.2% on month.
Household spending has been helped by an improvement in the economy, although sluggishness remains because workers have not received significant pay increases.
Japanese industrial production fell 2.1% on month in March, the Ministry of Economy, Trade and Industry said Friday.
The fall was worse than a 1.0% fall forecast by economists surveyed by the Nikkei, and came after a 3.2% increase in February. Industrial output edged up 0.1% in the January-March period from the previous quarter.
The ministry kept its assessment of production unchanged, saying that production was picking up.
IG futures suggest the DAX will open 4 points lower, the CAC 40 5 points higher and the FTSE 100 4 points higher.
Major stock indexes in Asia turned slightly lower on Friday, mirroring Wall Street's cautious sentiment on risk taking, though strong earnings results from tech firms saw shares in the sector rise.
The market-friendly result of the first round of elections in France helped the region start off the week strongly, but stocks have given back some of their gains as investors refocused on local drivers.
The Nikkei Stock Average was down 0.2% despite a softer yen, as traders wound down activity ahead of Golden Week holiday next week. The S&P/ASX 200 in Australia was down 0.3%, while Hong Kong's Hang Seng Index retreated 0.4%.
In South Korea, meanwhile, the benchmark Kospi pared gains, after touching a fresh six-year high earlier in the session, following comments by U.S. President Donald Trump that he would renegotiate or terminate a trade pact with the country, according to Reuters.
"The main theme overnight was cautiousness despite plenty of headlines from Bank of Japan and European Central Bank, and President Trump threatening to pull the U.S. out of" the North American Free Trade Agreement, said Commerzbank analysts.
Still, "U.S. tech companies continued to report strong earnings," the analysts said, and the strength was echoed in Asia.
In the U.S., both the S&P 500 and the Dow Jones Industrial Average rose less than 0.1%, while the Nasdaq Composite gained 0.4%, hitting a fresh closing high.
"At the end of the day, the market is always about earnings and growth," said JJ Kinahan, chief market strategist at TD Ameritrade. "If your earnings are good and the economy is performing, that makes up for a lot of other things."
Technology shares in the S&P 500 rose 0.6% and were among the best performers in the broad index on Thursday.
AstraZeneca has faced a large shareholder rebellion over its pay arrangements for the company's chief executive and chief financial officer.
The pharmaceutical firm said 38.8% of votes cast at its annual meeting Thursday opposed a change to its distribution of a share award known as AZIP. The company said investors holding 72.3% of shares voted on the remuneration report.
Previously, AZIP would vest only if the company's core earnings per share were at least one-and-a-half times the dividend and if the company maintained or increased the dividend in each of the four years following the awarding of the share. If the company failed to do so in any given year, the share award would lapse.
Renault said Thursday that its revenue rose by a quarter as the French car maker increased car sales and consolidated results for the first time from a Russian unit.
Revenue for the three months to the end of March climbed to 13.13 billion euros ($14.27 billion) from 10.49 billion euros in the same period last year. Car sales in the quarter advanced 16% to 873,678 vehicles.
Stripping out Autovaz, revenue rose about 20%.
The yen was slightly lower against the dollar. Still, the dovish stance by European Central Bank President Mario Draghi's will likely put downside pressure on the dollar-yen pair in the short term, said Osamu Takashima, chief forex strategist at Citigroup Global Markets Japan.
Additionally, the Mexican peso softened versus the greenback, correcting after a spike following Mr. Trump's decision to renegotiate NAFTA, rather than scrapping it altogether.
At 0250 GMT, EUR/USD edged lower less than 0.1% to 1.0867-70, USD/JPY was 0.1% lower at 111.11-12 and GBP/USD was flat at 1.2908-10.
Treasurys strengthened Thursday, pushing the yield on the 10-year note back below 2.3% as a drop in oil prices helped buoy demand from investors.
The yield on the benchmark 10-year Treasury note settled at 2.298%, compared with 2.312% Wednesday.
Bonds staged a modest rally, responding in part to the decline in oil prices, which fell to a one-month low amid increasing concerns of an oversupply in petroleum products, analysts and traders said.
Lower oil prices could help keep a lid on inflation, which is a main threat to longer-term government bonds as it erodes their fixed returns over time.
Bonds also gained support from continuing skepticism among investors over the prospects for fiscal stimulus, as well as month-end demand as some investors adjusted their portfolios to match changing indexes, analysts said.
Though the move in yields was modest, appetite for Treasurys was evident in an auction of seven-year notes, which were sold at an unexpectedly low yield amid signs of intense interest from foreign buyers.
Oil prices have steadily risen in Asian trading Friday after sliding anew in the U.S. Thursday.
Focus remains on whether the OPEC-led production cuts will get rolled over, and "I would expect to see" them extended, says ANZ's Daniel Hynes. He sees oil remaining around $50/barrel until a decision on that happens comes next month. An extension could send crude toward $60 in 2H, adds Hynes.
Nymex June futures rise 0.8% to $49.35 while Brent gains 0.7% to $51.79.
What fueled gold to start 2017 has faded, leaving prices liable to be range-bound for now.
Physical gold demand in both India and China, two of the largest consumers, have picked up. But geopolitical factors and Fed policy will likely have a far-bigger impact on short-term direction, analyst say.
London spot-gold prices were up $1.85 at $1,265.70/troy ounce.
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Tech Giants Extend Earnings Boom
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Brexit Fight Looms Over Role of EU Courts
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New Rules Force U.K. Companies to Disclose Supplier Payment Data
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Boxing's British Renaissance
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DJ App Dow Jones Newswires , 2 May 2017 04:55
European Morning Briefing: Stocks to Rise Ahead of Manufacturing PMI
Stocks seen gaining; EUR/USD 1.0914-17; Bund yield 0.323%; Brent crude $51.40; gold $1257.30
-Greece Reaches Bailout Agreement With Creditors, Greek Officials Say
-China Apr Caixin Final Manufacturing PMI Falls to Seven-Month Low
-U.S. Consumer Spending Rises After Inflation, While Prices Drop in March
-BOJ Officials Say Premature to Mull Policy Reversal, Minutes Show
-Trump, Putin to Speak on Tuesday, White House Says
Watch For: Eurozone, Germany, France, U.K., Spain, Italy, Greece, U.S. manufacturing PMI; eurozone unemployment; Angela Merkel meets Valdimir Putin in Sochi; earnings from Aberdeen Asset Management, BP, DSM, Jyske Bank, Shire; U.S. earnings from Apple, MasterCard, Mondelez, Pfizer
Greece and its international creditors reached an agreement early on Tuesday on the austerity measures and economic overhauls the country must implement to keep its bailout program going, clearing the way for debt-relief talks.
"There is white smoke...Negotiations on all issues have been completed," Greek Finance Minister Euclid Tsakalotos said.
The agreement will release the next bailout disbursement Greece needs to make around EUR7 billion in debt repayments in July. But more importantly, it sets the conditions for the creditors--the International Monetary Fund and the German-led eurozone--to discuss ways to ease the country's mounting debt.
"I'm certain that there will now be negotiations on debt because there is no excuse," Mr. Tsakalotos said.
Under the accord reached, Greece commits to further fiscal cuts after its current bailout ends through pension reductions equalling around 1% of gross domestic product in 2019 and a similar amount in 2020 from a reduction in the threshold for paying personal income tax.
Greece's left-led government also committed to labor reforms, privatizations and overhauls to make its economy more competitive. The two sides also agreed on a package of growth-enhancing measures mostly consisting of tax cuts that would be implemented if Greece exceeds its targets.
China's nationwide factory activity expanded at a slower pace in April, with a private gauge falling to a seven-month low.
The Caixin China manufacturing purchasing managers' index dropped to 50.3 in April from 51.2 in March, indicating a slower expansion of activity, Caixin Media Co. and research firm Markit said Tuesday.
Still, the index shows China's manufacturing sector has avoided a contraction of activity for 10 straight months. The 50 level separates an expansion in manufacturing activity from a contraction.
Output and new orders both increased at the softest rates since last September, while business confidence also weakened for two months in a row, Caixin said.
"Downward pressure on manufacturing gradually emerged in April," Zhengsheng Zhong, an economist at CEBM Group, said in a statement accompanying Tuesday's release.
China economic growth may weaken in the near term as prices of industrial products have started to retreat and active restocking comes to an end, Mr. Zhong said.
Americans' spending grew steadily in March after accounting for inflation, positioning the economy to rebound from another winter slowdown.
But consumer prices fell, a sign of underlying weakness that could give the Federal Reserve pause as it considers further increases in its benchmark interest rate.
Personal consumption, a measure of what households spent on everything from groceries to dental care, rose 0.3% after inflation, the Commerce Department said Monday. That followed two months of declines. Without accounting for inflation, spending was flat.
Some Bank of Japan officials said during a March meeting that it was premature to consider reversing the central bank's ultra-easy monetary policy, citing the country's near-zero inflation, according to a summary of discussions released Tuesday.
Those officials noted that "this was not the time for the bank to consider a policy change toward raising interest rates" by drawing a contrast between Japan's inflation rate and about 2% price growth in the U.S. and Europe, minutes for the March 15-16 meeting showed.
European stocks should open higher Tuesday, with DAX futures up 16 points and FTSE 100 futures up 20 points.
Asian equities broadly rose Tuesday, with strong earnings from technology companies in the U.S. providing a shot in the arm to regional tech firms.
Investors also sought to reposition themselves as many markets returned from the Labor Day holiday. In Japan, Tuesday is the last trading day of the week before holidays there.
Still, there was some caution ahead of a Federal Reserve meeting this week, a U.S. jobs report on Friday and the final round of the French presidential election on Sunday.
"The market is a little bit undecided about what's going to happen," said Christoffer Moltke-Leth, director of global sales trading at Saxo Capital Markets. He predicts that the Fed is unlikely to move on interest rates before the July meeting, but still expects three interest-rate increases this year.
Japan's Nikkei Stock Average rose 0.6% amid further declines in the yen. In Hong Kong, the Hang Seng Index hit a 21-month high while rising 0.4% but earnings hit some Australian stocks with the S&P/ASX 200 falling 0.5%. Manufacturing data from China also pressured upbeat sentiment.
More broadly, as Donald Trump's administration ended its first 100 days, market participants continued to deliberate what the Republican president will mean for markets.
Dave Lafferty, chief U.S. market strategist of Natixis Global Asset Management, said investors should think like lion tamers.
"Perhaps candidate Trump is starting the natural transition to President Trump. Maybe. But investors should remember what Trump is: an easily agitated political novice with an itchy Twitter finger. Some lions can be trained to obey and even learn new tricks. But that doesn't change the nature of what a lion is: an inherently unpredictable animal."
A climb in technology shares buoyed U.S. stocks Monday, boosting the Nasdaq Composite to a fresh record.
The gains lifted Apple, Google-parent Alphabet, Microsoft, Amazon.com and Facebook to records, the first time those companies--the five largest by market capitalization--all reached highs on the same day, according to WSJ Market Data Group.
"Investors are looking for growth anywhere they can find it. Technology is certainly one place," said Bruce Bittles, chief investment strategist for Baird.
The Nasdaq Composite rose 0.7%, to 6091.60. The S&P 500 climbed 0.2% but the Dow Jones Industrial Average slipped 0.1%.
The dollar was steady Tuesday.
The WSJ Dollar Index is down 3.4% this year, weighed by a spate of weaker-than-expected economic data in the U.S. that has undercut the case for the Fed to raise rates at a faster pace.
At 0350 GMT, USD/JPY was 111.87-88, EUR/USD was 1.0914-17 and GBP/USD was 1.2904-06.
U.S. government bonds fell broadly on the first day of May after logging the biggest monthly price rally since last June.
Selling pressure hit the bond market after Treasury Secretary Steven Mnuchin said Monday that ultralong bonds "could absolutely make sense." It is the latest sign investors are concerned over the potential issuance of debt that mature in more than three decades.
The remark came ahead of the Treasury's release of its quarterly refunding announcement Wednesday, a major platform for officials to make big changes regarding Treasury auctions.
Mr. Mnuchin said in February that the Treasury should study the viability of issuing longer-dated bonds with 50-year and 100-year maturities. Debate has been growing lately on whether the Treasury may consider selling ultralong bonds to fund its large fiscal stimulus down the road. The longest maturity the Treasury sells to investors now is 30 years.
"With refunding announcement later this week, it seems markets are on edge to any sort of new supply or new forms of supply," said George Goncalves, head of fixed-income strategy in the Americas for Nomura Securities International.
The yield on the benchmark 10-year Treasury note settled at 2.327%, compared with 2.282% Friday. The 30-year bond was the biggest loser Monday, with its yield rising to 3.012% from 2.952% Friday. The yield premium investors demanded to own the 30-year bond relative to the benchmark 10-year note was 0.685 percentage point, the highest since December.
Oil's 1% decline in the U.S. extended in early Asian trading Tuesday with the same factors of late being blamed for the price weakness: still-rising U.S. output and doubts about the effectiveness of the OPEC-led production cuts.
While analysts said most OPEC members support extending the cuts, "support and take part are two very different" things, said Stuart Ive at OM Financial. He said that Iran and Iraq may find it difficult to be on board "as market share remains the key producer catch phrase."
At 0207 GMT, June Nymex was down 14 cents at $48.70/barrel while Brent eased 12 cents to $51.40.
London spot gold prices ticked up in Asia after much of Monday's trading was interrupted by market closures for national holidays.
While some safe-haven demand has ebbed of late on a short-term budget deal in the U.S., geopolitical tensions remain high. At 0244 GMT, spot gold was up $1.25 at $1,257.30/ounce.
(MORE TO FOLLOW) Dow Jones Newswires
May 01, 2017 23:55 ET (03:55 GMT)
2017 Dow Jones & Company, Inc.
Dow Jones Newswires , 2 May 2017 04:55
European Morning Briefing: Other Top Stories
Le Pen Targets Left-Wing Voters With Attack on Finance
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Thaad Missile-Defense System Is Up and Running in South Korea
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Hamas Drops Call for Israel's Destruction
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Trump Preparing To Replace Top Banking Regulator -- Sources
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DJ App Dow Jones Newswires , 3 May 2017 04:27
European Morning Briefing: Eurozone Data, Fed Meeting in Focus
Stocks seen mixed; EUR/USD 1.0932-35; German 10-Year bund yield 0.330%; Brent crude $50.91; gold $1256.22
Watch For: Eurozone GDP and PMI; Germany unemployment; EU's Barnier speaks; earnings from Volkswagen
Figures to be released by the European Union's statistics agency are expected to show Wednesday that the eurozone economy grew at a quarter-to-quarter rate of 0.5% in the first three months of the year.
While unchanged from the fourth quarter of last year, that would be a slightly faster rate of growth than has been typical of the eurozone's recovery since mid-2013, and would also mean the currency area outpaced both the U.S. and the U.K.
IG futures suggest the DAX will open 4 points higher, the CAC 40 3 points lower and the FTSE 100 18 points lower.
Stock prices were tilted higher early Wednesday in Asia, where holidays have some major markets shut, while traders await the latest statement from the U.S. Federal Reserve.
But Australian stocks lagged for a second session as bank stocks continue to weigh on activity there.
The S&P/ASX 200 slid 0.6% after falling Tuesday to end a seven-session winning streak. Casting a cloud over that market was an underwhelming fiscal first-half report from Australia and New Zealand Banking to start that sector's earnings season.
As markets in Japan, Hong Kong and South Korea are closed for a holiday, Chinese equities started Wednesday's trading slightly lower, with the Shanghai and Shenzhen composite indexes down 0.2%.
Overall, volumes are lower in Asia amid the holidays, with Michael McCarthy of CMC Markets saying there's also some sign of investor fatigue. Indexes in the region have been hitting fresh multi-year or all-time highs of late.
One market to watch Wednesday on that front is Taiwan. The Taiex hasn't closed above 10000 since 2000 but has been testing that level since March.
Even as Apple's quarterly report late Tuesday raised some concern about iPhone demand, Taiwan's Taiex rose 0.2% to 9963. Taiwan is home to a number of Apple suppliers, and their stocks have been rising strongly in recent months along with Apple's.
U.S. markets edged higher Tuesday as investors assessed a mixed batch of corporate earnings.
The Dow Jones Industrial Average added 0.2%, while the S&P 500 and the Nasdaq Composite both gained 0.1%.
Major stock indexes have mostly climbed over the past two weeks, supported by reports pointing to corporate strength. With more than two thirds of S&P 500 companies having reported results, firms are on track to post their best results since the third quarter of 2011, according to FactSet.
"We're beginning to see the fruits of some better growth showing up in the bottom line," said Larry Hatheway, chief economist at GAM, which manages roughly $127 billion in assets.
Still, some investors caution that stocks in the U.S. look expensive relative to their historical averages, making them vulnerable to a pullback.
"I'm a little surprised the market hasn't come back in and given up more of its gains," said Lamar Villere at Villere & Co.
After 5 straight declines, China sets the daily trading midpoint higher in today's fixing following declines for the dollar in U.S. trading Tuesday.
The fix for onshore trading is at CNY6.8892, versus CNY6.8956 yesterday.
This ahead of later Wednesday's statement from the Fed, always a potential market mover for the dollar, and amid muted trading with markets in Japan, Korea and Hong Kong closed for holidays.
At 0250 GMT, EUR/USD was 0.02% higher at 1.0932-35, USD/JPY gained 0.06% to 112.06-07 and GBP/USD rose 0.04% to 1.2943-45.
The yield on the benchmark 10-year U.S. Treasury note settled at 2.296% Tuesday, compared with 2.327% Monday, as weak U.S. auto sales boosted demand for haven assets.
Car makers General Motors and Ford reported April declines of 5.8% and 7.1%, respectively, compared with the same month last year.
The gyration in the bond market came as the Federal Reserve started its two-day policy meeting Tuesday. It's scheduled to release an interest-rate statement Wednesday afternoon.
The central bank is widely expected to keep its key short-term policy rate unchanged after raising it by a quarter of a percentage point in March. A key focus is how recent weakness in economic releases may affect the Fed's plan in raising interest rates as soon as next month.
Traders said Treasury yields could slide if the Fed shows more caution in its statement. Yields are likely to rise if the statement suggests policymakers are not overly concerned about the growth momentum, thus raising market expectations on a rate increase next month.
Some analysts said a big selloff is unlikely given that the derivative market has priced in a high probability of a Fed move.
Fed-funds futures, used by investors to bet on the Fed's rate outlook, showed Tuesday a 66% probability that the Fed would tighten monetary policy again in June, according to CME Group.
Blake Gwinn, U.S. rates strategist at NatWest Markets, said it would be hard for the 10-year Treasury yield to rise to 2.6% again unless the Fed shocks the bond market.
The yield traded above 2.6% shortly before the Fed's decision to raise rates in March, but has since pulled back.
"The Fed will have a challenge on its hands in terms of raising rates until the economic fundamentals improve," said Kevin Giddis, head of fixed-income capital markets at Raymond James.
Projections by API that US crude inventories fell 4.2 million barrels last week has reversed some of oil's price declines in Asian trading this morning.
U.S. government data are due later Wednesday. Even if that reading is similar to the private industry group's report, "a U.S. inventory drawdown looks unable to offer too-much support" for prices, says Stuart Ive, a client manager at OM Financial. That's because market sentiment remains cautious ahead of this month's decision on whether OPEC will extend production limits. Russia decreasing its production marginally in April is also providing some support.
After falling more than 2% in the U.S. Tuesday, June Nymex is up 0.8% in Asia to $48.05/barrel while July Brent rebounds 0.9% to $50.91.
London spot-gold prices were little changed in Asian trading as market players await the FOMC statement. No rate hike is anticipated today, but signals on the pace of future moves will be sought.
Meanwhile, Indian demand for gold has been strong in the wake of last week's Akshaya Tritiya festival, providing some support.
Spot gold was down 3 cents at $1,256.22/troy ounce.
(MORE TO FOLLOW) Dow Jones Newswires
May 02, 2017 23:27 ET (03:27 GMT)
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Dow Jones Newswires , 3 May 2017 04:27
European Morning Briefing: Other Top Stories
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Trump, Putin Discuss Crises in Syria and on Korean Peninsula
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Fed Rate Rise Unlikely Wednesday, but Possible June Move in Focus
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DJ App Dow Jones Newswires , 4 May 2017 04:29
European Morning Briefing: Stocks to Rise After French Debate
Stocks seen higher; EUR/USD 1.0891-94; bund yield 0.327%; Brent crude $50.69; gold $1241.00
-French Presidential Candidates Macron, Le Pen Face Off in Debate
-China Apr Caixin Services PMI Falls to 11-Month Low
Watch For: EU, France, Germany and Italy services PMI; EU Retail sales; ECB's Lautenschlager and Praet speak; earnings from Rheinmetall and Societe Generale
A live head-to-head debate Wednesday between French presidential candidates Emmanuel Macron and Marine Le Pen rapidly descended into a tit-for-tat battle in which both struggled to land a knockout punch.
Seeking to close a 20-percentage-point gap in the polls before Sunday's vote, Ms. Le Pen quickly went on the offensive in the live prime-time event with a blistering attack on Mr. Macron, centering on his past as an investment banker and a minister in the government of incumbent President François Hollande.
Over the course of the two-and-a-half-hour marathon, however, Ms. Le Pen's barrage failed to deliver a destabilizing blow to the front-runner. Mr. Macron stood his ground, wearing his opponent down by highlighting what he said were technical holes in her sweeping plans to pull France out of the euro.
"Mr. Macron is the candidate of wild globalization," Ms. Le Pen said.
Mr. Macron shot back that Ms. Le Pen was preaching isolationism.
"Confronted with this mind-set of defeat, I represent the mind-set of conquest," Mr. Macron said.
A snap poll of 1,314 viewers by Elabe for BFMTV showed that 63% found Mr. Macron the most convincing and 34% Ms. Le Pen.
Activity in China's service sector expanded at the slowest pace in nearly a year, a private gauge showed Thursday, pointing to possible softness in the sector.
The Caixin China services purchasing managers' index slipped to 51.5 in April --the lowest since May 2016--from 52.2 in March, Caixin Media Co. and research firm Markit said.
A reading above 50 indicates an expansion in activity from the previous month while a level below that points to a contraction.
Muted business activity growth coincided with a softer expansion of staff numbers in April, although new orders picked up modestly, Caixin said.
IG futures suggest the DAX will open 38 points higher, the CAC 40 14 points higher and the FTSE 100 22 points higher.
Asian stocks tilted lower as investors were largely unmoved by an as-expected policy announcement from the Federal Reserve.
Korea's Kospi was a lone standout on the upside. The equities index topped 2011's record high to continue a strong recent run as foreign money flows into the market. The Kospi, up 0.6% Thursday, rose 11 of the past 14 sessions.
With the Japan market again closed for a holiday, other markets were also modestly down. The S&P/ASX 200 was recently down 0.5% after a 1% drop Wednesday, the index's biggest in six weeks, as bearish sentiment about the country's banks persists in the midst of earnings season.
Major U.S. indexes pared early losses Wednesday after the Fed's announcement, which some investors and analysts said signaled the central bank is looking past recent signs of tepid economic growth and holding course toward raising interest rates in June.
"This is showing the Fed is dismissing the weak data -- it hasn't altered any of their plans," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management. "And if the Fed is confident about the economic outlook, why shouldn't we be?"
At the close, the Dow Jones Industrial Average rose 0.04%, the S&P 500 slipped 0.13% and the Nasdaq Composite lost 0.37%.
The Fed's signals came as the Institute for Supply Management on Wednesday said economic activity across the U.S. service sector increased in April. A gauge of private-sector hiring came in slightly above expectations, according to payroll processor Automatic Data Processing and Moody's Analytics, two days ahead of the monthly jobs report.
Fed-fund futures indicate a 72% probability of a quarter-point increase at next month's Fed meeting, according to CME data.
The dollar rose broadly after Wednesday's Fed statement, in which policy wasn't changed. Levels were little changed in Asian trading from late New York levels. That includes the euro hitting a 1-week low against the greenback ahead of Sunday's final-round presidential vote in France.
But the common currency remains solidly above the where it was before last week's first round. Euro-dollar "is just simply not expressing a view that we are going to see Le Pen take the presidency on Monday, which of course would promote a near-armageddon scenario," said Chris Weston, chief market strategist at IG Group.
At 0250 GMT, EUR/USD was at 1.0891-94, USD/JPY was at 112.79-80 and GBP/USD was at 1.2875-77.
A bout of selling hit U.S. government bonds on Wednesday, driving yields on some very short-term debt to the highest since the financial crisis, as the Fed signaled that the door remains open for an interest-rate increase as soon as June.
"June is still alive," said Mary Ann Hurley, vice president of trading at D.A. Davidson & Co. in Seattle.
The yield on the benchmark 10-year Treasury note settled at 2.309%, compared with 2.296% Tuesday.
Friday's nonfarm employment report is the key data point for investors to gauge the growth outlook. Economists expect the U.S. economy added 188,000 new jobs in April, up from 98,000 in March. Wage inflation, via the average hourly earnings from the jobs report, will also be scrutinized.
Crude futures pulled back in Asia toward where they were before a late-session gain in the U.S. on Wednesday after the latest Federal Reserve policy statement.
That as focus returned to the latest inventory data from America, which deepened skepticism that production cuts from the Organization of the Petroleum Exporting Countries and Russia aren't making a dent in elevated global stockpiles.
Government data showed a modest decline for U.S. crude inventories and another unexpected increase in gasoline supplies as hopes about summer gas demand are frail. Over the last four weeks, sales fell 2.7% from a year earlier.
Meanwhile, U.S. crude exports continue to soar, aggravating the market's supply-and-demand imbalance. S&P Global Platts said U.S. oil has become more price-competitive, with West Texas Intermediate offered at a discount to Dubai crude, the main benchmark for Middle East supply to Asia. Exports the past month were 38% above outbound shipments the last eight weeks of 2016, the firm's data show.
"The market is looking for overall stock draws as evidence that the OPEC cuts are indeed driving global rebalancing," said Societe Generale. "This week's U.S. figures did not provide that evidence."
On the New York Mercantile Exchange, light, sweet crude futures for delivery in June recently traded down 0.2% at $47.72 a barrel in the Globex electronic session. July Brent crude on London's ICE Futures exchange fell 0.2% to $50.69.
London spot gold prices edged up in Asia trading, following a slide in the U.S. Wednesday toward a 2-week low after the FOMC meeting.
There were no surprises from it, but ANZ thinks the odds of a June rate hike has strongly risen due to the Fed's upbeat outlook on the economy. A higher rate environment dims demand for gold as a yield play.
Spot gold was up $3.22 at $1,241/troy ounce.
Russia's Putin Seeks Syria 'Safe Zones' After Talks With Turkey, U.S.
Russian President Vladimir Putin called for the creation of so-called "safe zones" in Syria following talks with U.S. President Donald Trump and his Turkish counterpart Recep Tayyip Erdogan, a move aimed at strengthening the fragile peace process in the six-year conflict. Russia’s Putin Seeks Syria ‘Safe Zones’ After Talks With Turkey, U.S.
Trump Meets Abbas, Says of Peace: 'We Will Get It Done'
President Donald Trump raised expectations for a peace agreement between Israelis and Palestinians as he met with Palestinian leader Mahmoud Abbas on Wednesday, saying he would do whatever is necessary to broker a deal and pledging, "We will get it done." Trump Meets Abbas, Says of Peace: ‘We Will Get It Done’
Comey Defends Role in Election
FBI Director James Comey, testifying before the Senate Judiciary Committee, defended his decision to alert Congress about a reopened investigation into Hillary Clinton's email use less than two weeks before the election. James Comey Defends Handling of Clinton Email Investigation
Musk Says Tesla on Track to Meet Model 3 Production Goal
With just weeks left for Tesla Inc. to meet his tight production deadline for its first mass-market vehicle, Chief Executive Elon Musk sounded confident the goal will be met. Musk Says Tesla on Track to Meet Model 3 Production Goal
Puerto Rico Enters Bankruptcy
Puerto Rico was placed under court protection on Wednesday in what amounts to the largest-ever U.S. municipal bankruptcy, a stark illustration of the depth of the economic crisis afflicting a U.S. territory with more than three million inhabitants. Puerto Rico Skids Into Bankruptcy After Years of Economic Distress
U.S. House to Vote Thursday on Health-Care Bill
The House vote on the Republican bill to replace most of the Affordable Care Act is a show of confidence by GOP leaders, who have struggled for weeks to secure the votes. U.S. House to Vote Thursday on Health-Care Bill
DJ App Dow Jones Newswires , 5 May 2017 04:28
European Morning Briefing: Stocks To Rise; US Jobs Report in Focus
Stocks seen higher; EUR/USD 1.0976-79; bund yield 0.398%; Brent crude $48.25; gold $1228.46
-Italian Lender Monte dei Paschi Swings to Quarterly Loss
Watch For: EU Retail PMI; EU's Juncker, Tusk, Tajani and Villarjo speak
IG futures suggest the DAX will open 18 points higher, the CAC 40 21 points higher and the FTSE 100 4 points lower.
Slumping commodities prices in China sent stock markets there lower Friday, leading declines across the region as investors feared that the nation's crackdown on speculation and borrowing could hurt metals demand.
The Shanghai Composite Index was last down 1% with the Shenzhen Composite off 0.7%. Hong Kong's Hang Seng Index lost 0.9%. Markets in Japan and South Korea were closed for a holiday.
Chinese commodity futures continued declines as speculators sold contracts amid tougher rules to cool an overheating market. The most actively-traded iron ore futures opened down 6.8% on the Dalian Commodity Exchange, adding to the 8% limit down on Thursday.
Weaker commodities prices were also dragging down stocks in Australia, with the S&P/ASX 200 down 0.4%.
Still, analysts expect that fears of any hard landing in China driven by the de-leveraging move may be short lived.
Tim Condon, head of research for ING in Asia, said he expects the People's Bank of China to have learned from its June 2013 experience, when the introduction of measures to curb the growth of shadow banking caused the interbank market to seize up.
In U.S. markets, The S&P 500 inched higher Thursday as gains in shares of consumer companies offset a slide in the energy sector.
"The earnings story is still very robust, and that's why investors have been able to look through some of the softer economic data," said Jason Draho, head of tactical asset allocation Americas at UBS Wealth Management.
The Dow Jones Industrial Average fell less than 0.1%, to 20951.47. The S&P 500 edged up less than 0.1% to 2389.52 and the Nasdaq Composite rose less than 0.1% to 6075.34.
Troubled lender Banca Monte dei Paschi di Siena said Thursday it swung to a net loss for the first quarter, hurt by declining revenue and one-time costs, as it struggles to right itself after having asked the Italian government to bail it out in December.
The bank said its first-quarter net loss was 169 million euros ($185 million), compared with a net profit of EUR93 million the year before.
The quarterly results follow two consecutive losses of a total of EUR3.54 billion ($3.88 billion) in the second half of last year, as the bank undertook large write-downs of bad loans.
Revenue for the quarter dropped by 21%, to EUR933 million, from the first quarter of last year, as both net interest income and fees declined.
Provisions for bad loans declined by 11%, to EUR308 million, from the same period a year earlier.
The dollar rose slightly in Asia following the House of Representatives vote to approve a bill to replace the Affordable Care Act.
The greenback had fallen Thursday as investors digested mixed U.S. economic data and a slide in commodity prices.
The currency jumped Wednesday after the Federal Reserve said it believes a recent slowdown in economic growth is "transitory" at the close of its latest meeting. The upbeat statement helped fuel bets that the Fed will raise rates at its June meeting, which would likely boost the dollar by making U.S. assets more attractive to yield-seeking investors.
U.S. economic data released Thursday however were mixed. The number of Americans applying for first-time unemployment benefits fell sharply last week to one of the lowest levels since the 1970s, while the U.S. trade deficit narrowed in March. Reports on U.S. factory orders and productivity were weaker-than-expected.
"The data warn that the world's second-largest economy has lost momentum," wrote analysts at Brown Brothers Harriman in a research note. "It is yet to be seen whether the weaker growth impulses translate to increased debt stress and new capital outflows."
The data came ahead of Friday's U.S. nonfarm payrolls report. A strong reading on that closely watched report would further bolster the Fed's case for raising rates and supporting the dollar. Economists expect the U.S. economy added 188,000 new jobs in April, up from 98,000 in March. Wage inflation, via the average hourly earnings from the jobs report, also will be scrutinized.
At 0250 GMT, EUR/USD was down 0.1% at 1.0976-79, USD/JPY was up 0.1% at 112.58-59 and GBP/USD slipped 0.1% to 1.2910-12.
The yield on the benchmark 10-year Treasury note settled at 2.354%, compared with 2.309% Wednesday. It marked the yield's highest close since April 10.
Matt Freund, co-chief investment officer and head of fixed-income strategies at asset manager Calamos Investments, said "a dramatic rise" in the yield on the U.S. 10-year Treasury note is unlikely given that Treasurys continue to offer much higher yields compared with their peers in many other developed countries, such as Germany and Japan.
The yield on the German bund rose to 0.386% from 0.329% Wednesday, marking the highest close level since March 27, according to Tradeweb.
Mr. Freund said he prefers corporate bonds to Treasurys in this still-low-yield world with the risk of a U.S. economic recession over the next few quarters remaining small. But he said he would consider buying Treasurys if yields rise to attractive levels.
The bond market is likely to suffer further selling pressure if Friday's jobs report shows solid jobs growth or signs that wage inflation picks up speed, thus bolstering the Fed's case to tighten policy next month, said traders.
Fed funds futures, used by investors to place bets on the Fed's interest rate policy, showed 74% odds that the Fed would tighten policy by its June meeting, according to CME Group.
Oil prices halted minor gains and slipped further in Asian trading, as crude slumped to its lowest levels since the OPEC production-cut deal.
The decline began in Asia Thursday and picked up steam in Europe, steadily falling right through U.S. trading to finish down nearly 5%. This all as traders send a no-confidence signal to OPEC after a report said the cartel won't deepen ongoing production cuts if the current caps are extended.
But some call the slump an overreaction. "The headwinds...are all temporary," contends Bernstein, adding, "The question is whether OPEC will commit to keep the cuts in place for as long as it takes to draw down excess inventories."
Nymex June WTI slipped 17 cents to $45.35 a barrel and July Brent fell 13 cents to $48.25 a barrel.
London spot-gold prices nudged up in Asian trading after logging their biggest 2-day decline since December.
That as Comex futures fell 1.6% Thursday in the wake of the FOMC statement, its biggest daily drop in nearly 5 months.
Spot gold was up $1.26 at $1,228.46/troy ounce.
French Probe Opened Into Vote Manipulation
French prosecutors opened a probe into a suspected attempt to tar presidential candidate Emmanuel Macron after anonymous files suggested he had created a shell company in a Caribbean island, where officials said they have no record of any such entity. French Open Probe Into Suspected Attempt to Tar Emmanuel Macron
VW Is Back and Rolling in Cash-and That Could Be a Problem
Volkswagen CEO Matthias Muller has brought the company back from an emissions-cheating scandal and returned it to strong profits. But VW also could be losing its incentive-and leverage-to change. VW Is Back and Rolling in Cash—And That Could Be a Problem
Google Reaches Tax Settlement in Italy
Alphabet Inc.'s Google has agreed to pay around $333 million in back taxes in Italy, settling one of multiple legal and regulatory battles that have dogged the tech giant in Europe. Google Reaches $333 Million Tax Settlement in Italy
GOP Approves Bill to Replace Most of Affordable Care Act
The House vote gave new life to legislation that had faltered at many stages, but the bill faces uncertain prospects in the Senate, where several Republicans have already voiced concerns over its major provisions. GOP Approves Bill to Replace Most of Affordable Care Act
EU Warns Emotions Getting Out of Hand on Brexit
European Council President Donald Tusk hit back at the U.K. Prime Minister's accusation of Brussels interference in the U.K. election, saying that a successful Brexit deal will be impossible if the two sides let "emotions get out of hand." EU Warns Emotions Getting Out of Hand on Brexit
Dow Jones Newswires , 8 May 2017 11:58
European Morning Briefing: Markets Cheer Macron Victory
Stocks to rise; EUR/USD 1.0971-74; Bund yield 0.421%; Brent crude $49.82; gold $1230.89
-Macron Wins French Presidency; Victory Lifts Stocks
-Merkel’s Conservative Party Secures Big Victory in State Election
-Saudi Arabia Energy Minister Confident Oil Production Cuts Will Be Extended
Watch For: Germany manufacturing orders; Centrica trading update, H&M April sales
Emmanuel Macron was elected president of France Sunday in a victory for a political newcomer who campaigned on promises to reform France’s heavily regulated and high-tax economy and fight a tide of nationalism sweeping the European Union.
The 39 year-old former investment banker, who won 66.1% of the vote, has vowed to undertake contentious labor reforms in France as part of a push for greater economic convergence among the EU’s fractious member states.
Marine Le Pen, who ran on a plan to pull the country out of the euro and close its borders to migrants, took 33.9%. The results surpassed pollsters’ predictions that Mr. Macron would win only about 60%.
Chancellor Angela Merkel’s conservative party on Sunday secured a surprisingly big victory in Germany’s northernmost state, according to initial results, dashing hopes from the rival center-left Social Democrats ahead of the national vote in September.
Ms. Merkel’s mainstream conservative Christian Democrats secured 33.3% of the vote in the western German state of Schleswig-Holstein, according to initial results published by broadcaster ARD.
The Social Democrats, which have ruled this small state sharing a border with Denmark since 2012, had hoped to emerge as the front-runner but won just 26.5% of the vote.
European stocks are poised for big gains Monday after Emmanuel Macron’s election victory, with DAX futures up 93 points and FTSE 100 futures up 36 points.
Stocks in Asia broadly rose as trading kicked off for the week, boosted by Mr. Macron’s win. Markets also caught an updraft from a spate of robust corporate earnings and a slightly better-than-expected April jobs report in the U.S. on Friday, which lifted the S&P 500 and Nasdaq Composite to records.
Japan’s Nikkei Stock Average rose 1.8% in early trade to its highest level since mid-December. The index was also playing catch-up with other markets in the region, having been shut since Wednesday for public holidays. Elsewhere, Korea’s Kospi added 0.5%, hitting an all-time high, while the S&P/ASX 200 in Australia gained 0.7%.
In the U.S. on Friday, the S&P 500 rose 0.4%, the Nasdaq Composite gained 0.4%, to 6100.76, its third record close of the week and the Dow Jones Industrial Average added 0.3%.
The euro slipped 0.1% in Asian trade, having earlier notched around 0.3% gains against the dollar.
The euro got as high as Y124.83 yen and $1.1040 after the election result but was last around Y123.85 and $1.0985, respectively. One factor for the caution is the relative inexperience of Mr. Macron, which is widely considered his Achilles’ heel, and investors have taken note.
Because Mr. Macron doesn’t have a traditional party backing him, political analysts will be eager to make sense of the makeup of his government once it is formed, said Chris Weston, chief market strategist at IG Group. He added that the possibility of a fragmented government could be holding down euro buying.
Still, looking ahead, economic data could take the baton from politics as a driver of the common currency. The Commonwealth Bank of Australia said it anticipates further gains in the euro-dollar and will approach the coming week with a strategy of buying on declines in the currency pair. The eurozone’s improving economic data, as well as low funding costs in Europe, are a strong incentive for equity investment there.
However, some analysts cautioned against piling into the euro just yet. Back at levels seen 6 months ago, before the dollar went on its post-election tear, the focus now goes from the French elections to the European Central Bank.
With inflation picking up in Germany and the U.S. quite possibly raising rates again next month, the ECB may start to ease some of its easy-money policies relatively soon–a bullish development for the euro. But “if political risk remains a recurrent theme in Europe, then long-term bears could simply exploit the uncertainty to send the euro lower,” said Lukman Otunuga, a research analyst at forex broker FXTM.
Stephen Innes, head of trading for Asia at forex broker Oanda, said full-on risk-on won’t be evident until the euro gets to at least Y124.50.
While seeming some broader profit-taking in Asia following the as-expected French election, analysts anticipate a fresh move higher for the euro once European trading begins. Mr. Innes said that looming as a bullish euro development is ECB easing up some on stimulus.
Sovereign-debt yields were up in Asia as Mr. Macron’s election win lessens any risk of a possible eurozone breakup, with a risk-on move cooling appetite for the haven asset.
The 10-year Japanese-government-bond yield was up 0.01 percentage point at 0.025%, with the 20 up the same to 0.57%. The 10-year Treasury yield was up about a basis point as well, to 2.36%.
Crude futures kicked off the week higher following sharp declines last week, buoyed by expectations that major producers will cut more of their supplies in a bid to whittle down the still-high global inventories.
The election of Emmanuel Macron also helped to assuage concerns that the European economy may see further headwinds.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in June traded at $46.85 a barrel at 0221 GMT, up $0.63 in the Globex electronic session. July Brent crude on London’s ICE Futures exchange rose $0.72 to $49.82 a barrel.
Oil plunged by more than 6% last week, dropping to their lowest level since November. The selling pressure was ignited by fears that members of the Organization of the Petroleum Exporting Countries won’t enlarge the size of their agreed production cuts when they meet on May 25, while non-cartel producers like Russia aren’t fully on board with continuing the curtailment.
Since then, some investors have returned to the market after Saudi Arabia reassured that the production cuts will be extended with Russia’s participation. Still, some traders remain wary that prolonging the curtailments will result in a swift and material reduction in global inventories.
“The fundamentals haven’t improved because the world is still awash with oil,” said a Singapore-based crude trader, noting the upsurge in U.S. shale production and exports, especially to Asia, is making it tougher for OPEC to compete.
According to JBC Energy, at least 40% of the U.S.’ 1.2 million barrels a day crude exports in February flowed to Asia. The recent narrowing spread between the Brent and Dubai benchmarks “could result in an uptick in U.S. exports heading to Asia in May,” said the consultancy.
Saudi Arabia’s Energy Minister Khalid Al-Falih said Monday that he was confident production cuts led by OPEC will be extended. He also said oil demand growth in China is expected to match last year’s, driven by the transportation sector, and India is also expected to register healthy growth in oil demand.
London spot-gold prices ticked up in Asia, but remained near 7-week lows around $1,230.89/troy ounce.
Chinese steel and iron-ore futures stabilized Monday after last week’s slump. While there’s some bargain-hunting, the outlook remains weak amid concerns about slower manufacturing activity and housing demand.
Shanghai steel rebar was up 1.8% at CNY3,030/ton and Dailan iron ore eased 0.3% to CNY465.
Dow Jones Newswires , 8 May 2017 23:55
European Morning Briefing: Stocks Likely to Struggle; Euro Flat
Stocks seen little changed; EUR/USD 1.0929-32; Bund yield 0.420%; Brent crude $49.51; gold $1226.92
-BOJ Kuroda: Not Ruling Out Additional Monetary Easing
-Akzo CEO Says a PPG Merger Could Present Problems
-Glencore Seeks Buyer for Tahmoor Underground Coal Mine
Watch For: Germany industrial production, trade data; Italy retail sales; earnings from Adecco, Commerzbank, Continental, E.ON, Electricite de France, Eiffage, Endesa, Pandora; U.S. earnings from News Corp, Walt Disney
Bank of Japan Gov. Haruhiko Kuroda said Tuesday that he would act “quickly” to expand stimulus measures if inflation loses traction, although he noted that no additional steps are needed for now.
“We have continued to fall behind schedule to accomplish our 2% price stability target, and from that perspective, I’d like to pay close attention to price conditions … and act quickly if necessary,” Mr. Kuroda said in parliament.
European stocks are unlikely to make much progress at Tuesday’s open, with DAX futures up just 1 point and FTSE 100 futures up 14 points.
Asian stocks were largely quiet Tuesday, with Australian bank shares among the laggards.
Earnings season for that sector came to an end with Commonwealth Bank of Australia reporting underwhelming results. The bank also flagged margin concerns, as some smaller peers have.
More pressing is the release later Tuesday of the Australian government’s budget proposal. Reports say it will include the introduction of a bank tax.
“This comes as a bit of surprise,” said Ric Spooner, chief market analyst at CMC Markets. The chatter has stoked concern of how big a tax might be and whether banks will be able to pass on the costs to their customers, he added.
Australia’s S&P/ASX 200 declined 0.4%.
Most Asian equities markets were seeing modest moves, though Taiwan’s Taiex briefly broke through 10000 for the first time in two years.
Japan’s Nikkei eased 0.1% to 19871 after Monday’s 2.3% jump to 17-month highs. Hong Kong’s Hang Seng index rose 0.2%, as China fell further after Monday’s slide. The Shanghai Composite pared early losses to recently sit 0.3% lower on the session.
The S&P 500 and Nasdaq Composite inched to fresh highs Monday, lifted by gains in technology and energy shares.
A new record close from Apple boosted the indexes, which spent much of the day in negative territory before popping higher in the final minutes of trading. All three major benchmarks gained less than 0.1%.
The chief executive of Akzo Nobel said customers are skeptical of a tie-up with a chief rival that might leave less choice for key paints and coatings.
“I have spoken to customers who have expressed concerns,” Akzo Chief Executive Ton Büchner said in an interview Monday after Akzo rejected a $27 billion takeover bid from PPG Industries. “There is certainly areas where the choice will be reduced, and that’s of course what the regulatory bodies will study very carefully.”
Mr. Büchner said regulators may require both companies to shed segments before such an acquisition could create the world’s largest paints and coatings maker. Akzo’s rejection of PPG’s latest offer sets up a potential hostile bid by the Pittsburgh company.
Mr. Büchner said employees in Akzo’s specialty chemicals business have expressed “anxiety and insecurity” despite PPG’s assertions that it would guarantee their jobs. PPG has also said local suppliers in the Netherlands and U.K. would still be allowed the opportunity to keep up their sales to the combined company.
But Mr. Büchner questioned those commitments. He said they would be enforceable in U.K. courts but not in the Netherlands.
Glencore has reversed plans to close a coal mine in eastern Australia and has put the operation up for sale even as it restarts development at the site amid a rebound in prices.
The mining company said Tuesday it had begun a sale process for its Tahmoor underground mine in the Southern Highlands region of New South Wales state. While that’s underway the Swiss commodities giant had recently recommended development activities.
The euro was little changed in Asia after sliding Monday.
The euro was recently at $1.0928, off Sunday’s highs of above $1.10.
Analysts warn the euro will face more political risks in the months ahead, including next month’s French parliamentary elections. Italian elections, which must be held by May 2018, could also see anti-euro candidates gain ground in a country beset by economic problems.
“Threats to the euro will not simply disappear just because the euro-safe candidate won the election,” said James Chen, head of research at Forex.com. “If Le Pen is able to gain sufficient influence in the French National Assembly, troubles for President Macron and the euro may potentially have just begun.”
The WSJ Dollar Index, which measures the U.S. currency against 16 others, also was little changed from Monday at 90.17. Investors are looking ahead to important retail sales and inflation data later in the week.
Friday’s closely watched U.S. jobs report showed hiring rebounded in April but the pace of wage growth slowed. Analysts said the report supports the Fed’s case for raising interest-rates at a steady pace.
Fed-funds futures, used by investors to bet on the U.S. interest-rate outlook, show a 83% chance that the Fed raises rates at its next meeting in June, according to CME Group data. Higher rates typically support the dollar by making U.S. assets more attractive to yield-seeking investors.
With the risk of Marine Le Pen winning the French presidency now out of the way, yields on German bunds look poised to hit 1% by the end of 2017, ABN Amro said.
Elevated political risk was a major factor behind the drop in bund yields to 0.174% in mid-April.
U.S. government bond prices drifted lower Monday as investors anticipated coming economic data releases and a round of bond auctions this week.
The yield on the benchmark 10-year Treasury note settled at 2.376%, above the 2.352% on Friday.
“At this point we’re just kind of seeing some squaring up in the U.S. market” with investors “looking ahead to supply this week and a couple of the data points,” including reports on the consumer-price index and retail sales, said John Herrmann, director of rates strategy at MUFG Securities in New York.
This week’s auctions kick off Tuesday with a $24 billion sale of three-year notes, followed by a $23 billion sale of 10-year notes Wednesday and a $15 billion sale of 30-year bonds Thursday. An influx of new bonds can sometimes outpace demand, causing prices on existing bonds to fall in the secondary market.
Though still well below the 2.6% level it reached in December and March, the 10-year yield has been on the upswing lately, rising from a five-month low of 2.177% in mid-April.
Oil got a fresh boost in Asia amid expectations that major producers will keep sidelining their output.
A Bloomberg report said OPEC members haven’t completely ruled out the option of increasing their cuts at their meeting on the May 25. This followed data released Monday that showed lackluster April crude imports for China.
“The recovery remains fragile, with mixed fundamental data and a stronger dollar likely to keep investor appetite muted today,” said ANZ.
At 0155 GMT, June Nymex was up 0.4% at $46.61/barrel and July Brent gained 0.3% to $49.51.
London spot-gold prices were little changed in Asia with near-term outlook subdued as investors increasingly prepare for a U.S. rate increase in June.
At 0139 GMT, gold was up 90 cents at $1,226.92/troy ounce.
Dow Jones Newswires , 9 May 2017 23:54
European Morning Briefing: Stocks Face Weaker Open
Stocks seen lower; EUR/USD 1.0893-96; Bund yield 0.431%; Brent crude $49.01; gold $1221.70
-Germany’s Schaeuble: Will Support France’s Macron in Strengthening Europe
-Germany Posts Record Current-Account Surplus in March
-Fed’s Kaplan Sees Two More Rate Increases This Year
-Trump Fires James Comey as FBI Chief
-E.ON to Issue Eurobonds to Pay for Nuclear Waste Bill
-China Consumer Inflation Edges Up in April
-BOJ Emphasizes Easing Commitment Through Opinion Summary
Watch For: France industrial production; earnings from Axel Springer, Delhaize, Eni, HeidelbergCement, Hochtief, ISS, Suez, Swiss Life, UniCredit; AXA trading update
Finance Minister Wolfgang Schaeuble said that while Germany would support French President-elect Emmanuel Macron’s efforts to strengthen Europe, there is little chance his idea of agreeing on a common eurozone budget and finance minister will come to fruition any time soon.
“We will firmly support him in his efforts to strengthen Europe and the currency union,” Mr. Schaeuble said Tuesday at a event of his Christian Democratic Union.
But “a finance minister must of course not only carry a title, but he must be able to make decisions. For that, we must change European treaties which don’t provide for this,” he said.
“To believe right now that we would be able to achieve a change in the European treaties is quite unrealistic.”
He said the required unanimous decision among all European Union members is unlikely.
Mr. Schaeuble said he also has promoted the fundamental idea of having a common budget and one eurozone finance minister. However, it is the wrong time to push for this, he said.
“We have no fundamental conflict” with France, Mr. Schaeuble insisted.
Germany posted a record current-account surplus in March, a development that is likely to intensify international criticism of its economic policies for depending too heavily on exports to drive growth, and being too reluctant to invest at home.
Germany’s current-account surplus-the gap between what it earns from and what it spends in overseas markets-came in at EUR30.2 billion in March. By comparison, it was EUR29.1 billion in March 2016.
That marks the highest monthly surplus since records began after the country’s unification in 1991, according to Germany’s central bank.
Federal Reserve Bank of Dallas President Robert Kaplan reiterated Tuesday that his baseline scenario for U.S. central-bank action this year is three interest-rate raises, including the increase already done in March.
Mr. Kaplan said rate increases should continue to be done “gradually and patiently,” and that the specific timing will depend on economic growth and inflation.
European stocks face a cautious start Wednesday, with DAX futures down 47 points and FTSE 100 futures down 8 points.
Equity markets in Asia were broadly higher early Wednesday, with local drivers outpacing global geopolitical concerns.
Markets have thus far had a muted reaction to the unexpected firing of James Comey, the director of the Federal Bureau of Investigation.
Japan’s Nikkei Stock Average was recently up 0.4%, while Australia’s S&P/ASX 200 reversed early losses to trade 0.3% higher. Hong Kong’s Hang Seng Index was 0.7% higher, reaching a 21-month high. Haven assets saw a bit of buying in Asian trade after the announcement about Mr. Comey, with both the yen and gold higher.
On Tuesday, the Dow Jones Industrial Average fell 0.2%, to 20976, the S&P 500 fell 0.1% and the Nasdaq Composite gained 0.3%.
E.ON plans to issue new eurobonds to offset the cost of a mandatory payment to the nation’s nuclear-waste management fund.
The company currently has financing needs of around EUR15 billion ($16.34 billion). Most of the proceeds — around EUR10 billion — will be used for the fund as Germany aims to eliminate is use of nuclear energy by 2022. Another EUR5 billion is needed to refinance bonds that will expire over the course of the next 12 months, including a EUR900 million bond maturing at the end of May.
“You won’t have to wait long,” said finance chief Mark Spieker, in an interview with CFO Journal Tuesday.
The underlying conditions of Germany’s nuclear phaseout were not “optimal,” Mr. Spieker said. However, an agreement between the German government and energy firms — reached in early March — provides more visibility for E.ON, Mr. Spieker said. The firm will be able to reduce some of the provisions it has already taken, he said.
The euro’s latest push higher against the yen puts the common currency half way between 2012’s low of Y95, when the region’s sovereign-debt woes scared away investors, and 2014’s peak of Y150 ahead of the European Central Bank launching QE.
While some political uncertainty continues in Europe, speculation has been increasing that improvement of the eurozone economy and inflation expectations is likely to prompt the ECB to start pulling back some easy-money policies before the BoJ. Despite the euro’s recent gains following the French election, there appears room for more ascent.
A pullback for dollar-yen in early Asian trading after further gains in the U.S. briefly got the greenback back above Y114. While a march back toward Y115–the high of the trading range which lasted until last month’s yen rally–“appears inevitable,” said Kathy Lien, managing director of forex strategy at BK Asset Management in New York. “But a break may be more difficult.”
The dollar traded firmer across the board late Tuesday on the back of hawkish comments by FOMC alternate member, Cleveland Federal Reserve President Loretta Mester that the Fed should not fall behind its pace of interest rate increases, and some investor concerns about the risk of a dollar shortage as the Fed raises rates and potentially shrinks its balance sheet later this year.
CBA said it doesn’t view the shrinking of the Fed’s balance sheet as generating a dollar shortage. One-year EUR/USD, USD/JPY and GBP/USD basis swaps showed no signs of this concern, and actually showed a lowering in the cost of dollar swap funding.
At 0350 GMT, USD/JPY was 113.75-76, EUR/USD was 1.0893-96 and GBP/USD was 1.2950-52.
Generali Investments expects the Bund yield to continue to trend higher and test the 0.50% level, while OAT-Bund spreads should stabilize at around 40 basis points, said fund manager Mauro Valle.
He bases his expectations on “sizably lower” political risks after the French elections, and with the focus turning again to economic data, which he says have been “quite positive” over the last few weeks. Investors are likely to focus on expected inflation and on the ECB’s next moves in terms of forward guidance and the possible announcement of tapering, Mr. Valle said.
Prices of U.S. government bonds fell for a second consecutive session Tuesday, driving the yield on the benchmark 10-year Treasury note to the highest level in more than a month.
The selling pressure was driven by new debt supply and ongoing market expectations that the Federal Reserve is likely to raise short-term interest rates again in June.
The yield on the benchmark 10-year Treasury note settled at 2.405%, compared with 2.376% Monday. It marked the yield’s highest closing level since March 30.
A gauge of expected price swings in the bond market on Monday fell to the lowest level in more than two years. Analysts say it is a sign investors don’t expect a sharp rise in yields given some concerns surrounding U.S. growth momentum, the global ripples from China’s actions to curb excessive borrowing, and market bubbles, as well as the uncertainty looming over President Donald Trump’s fiscal stimulus.
Oil futures got some respite in Asia after the American Petroleum Institute said U.S. crude supplies fell by nearly 6 million barrels last week.
The API, however, estimated gasoline stockpiles increased again–coming at a time that inventory levels are already unusually high for this time of the year. Official data from the Energy Information Administration will be released later Wednesday.
But analysts say the price rebound is likely to be shortlived as on Tuesday the EIA boosted its U.S. oil-production forecasts, including 2018’s average now seen being just shy of 10 million barrels a day. Output has only gotten back above 9 million the past several months, and this year’s average is now seen being 9.3 million. Meanwhile, the EIA now sees depressed oil prices at least through next year, citing new oil flowing out of Canada and Brazil set to inundate an already-oversupplied market.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in June recently traded up 0.6% at $46.17 a barrel in the Globex electronic session. July Brent crude on London’s ICE Futures exchange rose 0.6% to $49.01. Both contracts settled down 1.2% on Tuesday.
London spot gold continued to languish near 7-week lows amid this week’s risk-on market climate.
There are few drivers for gold at present, especially with a U.S. rate hike likely in June. At 0151 GMT, Prices were up 0.1% at $1,221.70/troy ounce.
Dow Jones Newswires , 11 May 2017 11:54
European Morning Briefing: Stocks to Edge Lower Despite Oil Surge
Stocks seen slightly lower; EUR/USD 1.0873-76; Bund yield 0.423%; Brent crude $50.43; gold $1220.10
-Fed’s Rosengren Sees Three More Rate Rises This Year as Reasonable
-Adidas Sells TaylorMade and Other Golf Brands to KPS for $425 Million
-Barclays to Pay $97 Million to Settle SEC’s Allegations of Overbilling
Watch For: U.K. interest rate decision, Bank of England MPC meeting minutes, U.K. trade data; earnings from
Aegon, A.P. Moller-Maersk, BT Group, Credit Agricole, Deutsche Post, Deutsche Telekom, Enel, Generali, Henkel, ING, OMV, RTL, Telefonica, Vivendi, Zurich Insurance
Investors tracking the U.K. economy ahead of the June 8 general election will watch for trade balance data due Thursday.
Economists polled by The Wall Street Journal expect that Britain’s global goods trade deficit narrowed slightly in March to GBP11.8 billion, as the pound’s weakness boosted overseas demand for U.K. products.
Also Thursday, the Bank of England is due to announce its monetary policy decision, with markets expecting no change to the benchmark interest rate, currently at 0.25%.
Federal Reserve Bank of Boston President Eric Rosengren said Wednesday he isn’t worried by tepid economic data over the start of the year and still believes the U.S. central bank can raise rates this year at a pace more aggressive than many of his colleagues expect.
With the economy likely to remain on “solid footing” with a declining unemployment rate and inflation around the Fed’s 2% target, “such conditions justify continuing a gradual increase in the federal-funds rate and also beginning to reduce gradually the level of the assets on the Federal Reserve’s balance sheet,” Mr. Rosengren said.
“It would still be reasonable to have three rate increases over the remainder of this year, assuming the economy evolves like my forecast envisions,” Mr. Rosengren said.
Right now, monetary policy is “quite accommodative,” the official said. “It is important to avoid creating an over-hot economy” that would require a stiffer pace of rate rises, making gradual rate rises now important, Mr. Rosengren said.
Mr. Rosengren also wants the Fed to beginning the process of shrinking its $4.5 trillion balance sheet, a view shared by his colleagues. He said he wants “a very gradual reduction of securities held on the Federal Reserve’s balance sheet relatively soon,” which he reckons could happen in the background, allowing changes in the Fed’s short-term rate target to be the primary tool the central bank uses to influence the economy.
In his speech, Mr. Rosengren said he isn’t worried that some uneven data in the first quarter of 2017 heralds a deeper problem in the economy. The weak first-quarter growth data is likely a “transitory phenomenon,” he said.
European stocks could edge lower to start Thursday, with DAX futures down 2 points and FTSE 100 futures down 11 points.
Commodities-heavy Asian markets led stocks broadly higher Thursday but Chinese equities fell anew amid fresh liquidity concerns.
According to an official WeChat account run by the state-owned Securities Times, the country’s securities regulator held a meeting with brokers with large capital pools on Monday. That pool totals hundreds of billions of yuan, the equivalent of tens of billions of dollars, with a majority of that allocated to bonds.
“Strong cleanup of the capital pool in bonds will cause a big blow to the bond market and may trigger liquidity risk and even ripple to the stock market,” the Securities Times note said.
The Shanghai Composite was recently down 0.4% having opened 1% lower. Elsewhere, the biggest gains for oil futures this year helped bolster stocks in a number of Asian countries.
In Hong Kong, the Hang Seng rose 0.6% to reach 22-month highs. Meanwhile, the Nikkei rose 0.2% amid further overnight declines in the yen. That index remains slightly below the 20000 level at about 19335.
Declines in shares of Walt Disney and Boeing dragged the Dow Jones Industrial Average lower Wednesday.
The blue-chip index lost 0.2%, to 20943, while the S&P 500 and Nasdaq edged up 0.1%.
“We have had a very good reporting season, but…we really need the tax cuts” for equity markets to push higher, said Monica Defend, head of global asset allocation research at Pioneer Investments.
Adidas has agreed to sell golf brands TaylorMade, Adams Golf and Ashworth to private-equity firm KPS Capital Partners for $425 million, after a year on the market.
The German-based sportswear maker on Wednesday said it expects to complete the transaction with KPS by the end of the year.
Barclays agreed to pay $97 million to settle claims that its former wealth-management business overcharged thousands of clients on advisory fees and mutual-fund sales charges, the Securities and Exchange Commission said Wednesday.
The SEC said that between 2010 and 2015, the Barclays unit improperly collected fees from clients for services it didn’t perform. The business, which Barclays has since sold, failed to oversee third-party managers who invested client money elsewhere but still charged customers for monitoring the performance, the SEC said.
The dollar steadied in Asia having fallen against the currencies of commodity exporters Wednesday, following a rebound in oil prices.
A broader measure of the dollar, The Wall Street Journal Dollar Index, was last up 0.02%, to 90.41.
At 0350 GMT, USD/JPY was 114.18-19, EUR/USD was 1.0873-76 and GBP/USD was 1.2942-44.
U.S. government bond prices retraced early gains, ending Wednesday slightly lower after an auction of 10-year notes drew soft demand.
The yield on the benchmark 10-year Treasury note settled at 2.414%, compared with 2.405% Tuesday. The $23 billion of new 10-year notes were sold at a 2.400% yield, with a range of statistics showing below-average interest from buyers.
Also weighing on Treasurys were comments from the Fed’s Eric Rosengren.
Crude futures eked out more gains in Asia as investors are interpreting the latest hefty decline in U.S. crude inventories to be a harbinger of future demand.
Oil prices shot up over 3% in New York after data from the Energy Information Administration showed U.S. crude stockpiles dropped 5.2 million barrels in the week ended May 5, far exceeding market expectations. The reading marks the biggest weekly drawdown since December. The surprise decrease in gasoline and distillate inventories also helped mitigate worries that U.S. commuters weren’t soaking up enough gasoline to offset supply.
Gasoline demand rose to the highest since late March to over 9.2 million barrels a day, but still down 2.4% from the same period last year, according to the data.
“The data suggests that U.S. oil consumption remains robust,” said Vivek Dhar, a commodities strategist at Commonwealth Bank of Australia, noting that overall inventories in terms of days of supply are closest to the six-year historic average this year.
Nonetheless, the fact that the bounce had already lost steam in Asia trade could show that the market was overwhelmingly bearish, say some analysts.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in June traded at $47.55 a barrel at 0237 GMT, up 0.4% in the Globex electronic session. May Brent crude on London’s ICE Futures exchange also up 0.4% to $50.43 a barrel.
London spot gold continued to see listless trading in Asia amid a lack of near-term catalysts.
The precious metal saw some brief gains a day earlier amid uncertainty stoked by Trump’s firing of FBI Director Comey, but it moved back down toward 7-week lows Thursday, up 0.1% at $1,220.10/troy ounce.
Dow Jones Newswires , 12 May 2017 11:57
European Morning Briefing: Mixed Start for Stocks as Oil Gains Again
Stocks seen mixed; EUR/USD 1.0872-75; Bund yield 0.433%; Brent crude $50.81; gold $1225.10
-ECB’s Praet: Not Yet Time to Normalize Policy
-Italy Tries to Reassure U.S. on Its Bank Turnaround
-Greece Eyes Bond Sale Amid Optimism Over Debt Deal
-Volkswagen Resolves Another U.S. Emissions Case for $1.2 Billion
-Barclays Shakes Up Investment Banking Unit and Announces Hiring Spree
Watch For: Eurozone industrial production; Germany GDP, CPI; Spain CPI; U.S. CPI, retail sales; speeches by ECB’s Constancio, Fed’s Evans and Harker; earnings from Allianz, ArcelorMittal, Richemont, ThyssenKrupp
Economists expect official figures to show Friday that the German economy accelerated during the first three months of the year, outpacing the U.S., the U.K. and France by recording an increase of 0.6% in its gross domestic product compared with the previous quarter.
That would be mixed news for the European Central Bank. While a pickup in the eurozone’s largest member should support its efforts to raise inflation sustainably to its target, a faster rate of growth is also likely to strengthen the conviction of many Germans that interest rates are too low and the bond-buying program unnecessary.
Peter Praet, the ECB’s chief economist, said Thursday that now isn’t the time to start normalizing monetary policy in the eurozone, even though the Federal Reserve is cautiously tightening policy.
“We are not yet there,” he said, adding that monetary policy support was still needed to help the eurozone grow.
“Scaling back too early could jeopardize the recovery and the convergence of inflation toward our objective,” he said.
Italy’s Economy Minister Pier Carlo Padoan sought to reassure U.S. Treasury Secretary Steven Mnuchin about the health of the Italian banking system, saying the sector is on a firm road to recovery, an Italian G-7 official said Thursday.
The official also said Mr. Padoan provided figures about bad loans at Italian banks, saying they are bound to reach “a physiological level quite rapidly,” thanks also to a number of large bad loan sales Italian lenders are planning to carry out this year. The two met on the sidelines of a meeting of G7 finance ministers and central bank chiefs in this southern Italian town.
European stocks may start Friday’s session mixed, with DAX futures up 15 points but FTSE 100 futures down 2 points.
Stock markets across Asia were broadly down early Friday, tracking weakness in Europe and the U.S. amid disappointing earnings reports.
In Japan, stocks were hit by 0.5% gain in the yen against the U.S. dollar over the last day, making the country’s exports less competitive. The Nikkei Stock Average was last down 0.6%, reducing the likelihood that the index could breach the psychological 20000-point level during the session.
Elsewhere, Australia’s S&P/ASX 200 declined 0.7% while the Shanghai Composite Index was up 0.1%. Hong Kong’s Hang Seng Index was flat.
“At the margins it’s similar to what we saw in the U.S., there is a slightly risk-off feel to this market,” said Chris Weston, chief market strategist at IG Markets in Australia.
Mr. Weston said sentiment was favoring less discretionary stocks in the market, although commodities in Australia continue to find some support. Among those, Rio Tinto was last up 0.6%.
U.S. stock indexes pulled back Thursday, as disappointing earnings reports put pressure on shares of consumer-discretionary companies.
Major indexes initially headed toward one of their biggest declines of the month as retail stocks slid, then pared losses heading into the afternoon.
Individual stocks have sold off following corporate earnings reports, but stock indexes have barely budged in recent sessions – a trend attributed to investor belief that the U.S. economy was on solid footing.
“Investors are more willing to move into the market, and less skittish to downturns,” said Brad McMillan, chief investment officer at Commonwealth Financial Network.
The Dow Jones Industrial Average fell 0.1%, to 20919, the S&P 500 lost 0.2%, and the Nasdaq Composite shed 0.2%.
Volkswagen cleared a key hurdle Thursday in resolving a civil case in the U.S. over its diesel emissions crisis, winning court approval for a roughly $1.2 billion deal to compensate drivers of larger, more expensive cars equipped with cheating devices.
U.S. District Judge Charles Breyer in San Francisco gave his blessing Thursday to the deal, which involves around 82,500 vehicles with 3-liter engines, including newer Volkswagen, Audi and Porsche cars and sport-utility vehicles.
The 3-liter settlement brings Volkswagen’s tab for civil payments in the emissions scandal to around $17.4 billion, U.S. Justice Department attorney Joshua Van Eaton said in court Thursday.
Barclays’ corporate-and-investment banking chief Tim Throsby has taken interim control of the bank’s markets business and launched a hiring spree as the British lender looks to bolster returns at the unit.
Barclays will hire between 50 to 100 people across the investment banking business, part of Mr. Throsby’s efforts to invest in the franchise, according to a person familiar with the matter.
In a memo sent to staff Thursday Mr. Throsby said Joe Corcoran, who currently heads the markets business, will now take on the newly created position of vice chairman of markets. In the U.S., Joe McGrath, chief executive of the Americas division, will also take on the role of global head of banking.
James Comey’s firing as FBI Director and the resultant political uproar aren’t good for the dollar as the political disturbance in Washington is likely to make it more difficult for the Trump administration to garner congressional support for tax cuts and infrastructure spending.
The prospects for such fiscal stimulus raised U.S. growth expectations following the election in November, but those hopes have been fading the past couple months. So far, though, investor reaction has been scant with the WSJ Dollar Index falling 0.05% both Wednesday and Thursday. It was recently down 0.06% at 90.39.
“We think that the currency is still likely to appreciate in the near-to-medium term but market doubts about the Trump administration’s ability to advance its agenda could potentially…spill over into the [dollar] going forward,” Scotiabank said.
Investors are tracking important economic data this week for signs that the U.S. economy continues to strengthen.
Data Thursday showed initial jobless claims, a proxy for layoffs across the U.S., decreased to a seasonally adjusted 236,000 in the week ended May 6, coming in below economists’ expectations. Separately, a gauge of U.S. business prices rose more than expected in April, signaling that price pressures have firmed.
The data come ahead of Friday’s inflation and retail-sales reports. Evidence that inflation is accelerating would bolster the Fed’s case for raising interest rates.
Fed-funds futures, used by investors to bet on the U.S. interest-rate outlook, show an 83% chance that the Fed raises rates at its next meeting in June, according to CME Group data.
At 0350 GMT, USD/JPY was 113.70-71, EUR/USD was 1.0872-75 and GBP/USD was 1.2886-88.
U.S. government bonds strengthened for the first time in four days Thursday as lower stock prices stoked demand for haven assets.
The yield on the benchmark 10-year Treasury note settled at 2.400%, compared with 2.414% Wednesday, which was the highest close in more than a month.
Some traders said one trigger for the flight-to-safety trades in Treasury debt was reports that North Korea is poised for the first intercontinental ballistic missile flight test this year, which reminded investors of the geopolitical risks that flared in April.
As Greek assets rally on optimism of a deal to restructure the country’s crushing debt, Greek government officials are planning a bond issue–the first by the country in three years–possibly as soon as July or September.
Earlier this month, Athens reached a deal with international creditors on fresh austerity measures that would unlock the next payment in its EUR86 billion bailout program. But the bigger goal is a deal to restructure its EUR315 billion debt, possibly by stretching out maturities, capping interest rates and postponing interest payments.
The combination of a debt deal, Greece’s inclusion in the ECB’s bond-buying program and a successful re-entry to capital markets could mark a turning point for the country’s economy.
An agreement between Greece and its creditors is key to any debt relief. According to people familiar with the talks, the IMF’s Christine Lagarde and Angela Merkel agreed in principle in a February meeting to find a solution to lighten Greece’s debt burden.
Oil futures were muted in Asia after they jumped another 1% in the U.S. Thursday.
ANZ pins the recent rebound on expectations of more–and possibly deeper–cuts by OPEC. At 0233 GMT, June Nymex futures were 3 cents higher at $47.86/barrel while July Brent were up 4 cents at $50.81/barrel.
London spot gold continued to tread water in Asia, with prices remaining near recent lows amid a lack of trading catalysts.
There is little safe-haven demand at present while physical demand from Asia is at a seasonal low. At 0206 GMT, gold was up 55 cents at $1,225.10/troy ounce.
Dow Jones Newswires , 15 May 2017 12:05
European Morning Briefing: Resilient Stocks to Extend Gains
Stocks to extend gains; EUR/USD 1.0929-32; Bund yield 0.394%; Brent crude $51.58; gold $1229.41
-New Cyberattack Spurs Global Manhunt
-Angela Merkel’s Christian Democrats Win Election in Germany’s Biggest State
-Renault Looks to Resume Production at Some Plants
Watch For: Greece flash estimate GDP; earnings from Porsche, RWE, TUI
The European Commission’s release of its consumer confidence measure on Friday will provide the first indication of what impact Emmanuel Macron’s victory in the French presidential elections is likely to have on the eurozone economy’s near-term growth prospects, if any.
Eurozone consumer confidence has been firming this year, even as it seemed possible that candidates hostile to the euro could triumph in Dutch and French elections. So it is not certain that successive victories for pro-euro candidates in those votes will have a transformative impact on sentiment and spending. Economists expect the confidence measure to rise to minus-three from minus-3.6 in April, which would be its highest level since July 2007.
Chancellor Angela Merkel’s Christian Democratic Union beat the center-left Social Democrats in the regional election in Germany’s biggest state, exit polls and early results said, providing a major boost to the German leader ahead of national elections in September.
The center-right Christian Democrats finished ahead of the Social Democrats 34.3% to 30.6% in Sunday’s state election in North Rhine-Westphalia, according to a projection based on exit polls and early results by ARD public television.
The result represented a major upset in German politics and underlined Ms. Merkel’s political strength as she prepares to run for a fourth term. North Rhine-Westphalia — whose population of 18 million represents more than one-fifth of Germany’s total — has long been a stronghold of the Social Democrats, who have governed in the state for all but five of the last 50 years.
The upstart, anti-immigrant Alternative for Germany party took 7.7%, according to the projection, meaning it will now have seats in 13 of Germany’s 16 state parliaments. The pro-business Free Democratic Party took 12.2%, more than 3 percentage points better than in the state’s previous election and building momentum ahead of party’s campaign to try to regain seats in the national parliament in the federal election on Sept. 24.
A cyber pandemic that tore through computer systems over the weekend has led to an international manhunt ahead of an expected renewed assault on Monday.
Law enforcement groups in the U.S. and Europe, where the virus first struck Friday, were working with an informal posse of cybersecurity experts to stop the malware and find its perpetrators. The ransomware program, known as WannaCry or Wanna Decryptor, exploits vulnerabilities in Microsoft’s Windows systems.
We are “supporting the investigation with everything we have-this is big and clearly requires concerted cross-border response,” Rob Wainwright, head of Europol, said on his verified Twitter account over the weekend. The International Criminal Police Organization, or Interpol, also tweeted Sunday that it is helping with investigations.
European stocks should extend gains Monday, with DAX futures up 44 points and FTSE 100 futures up 20 points.
Asian stocks were mixed Monday as investors continued to shake off reasons to worry.
“Risk-off sentiment is not too strong,” said Masashi Murata, a senior currency strategist at Brown Brothers Harriman. Despite weak U.S. inflation data on Friday, the economy there remains steady, he added, auguring well for export-dependent Asian economies.
After falling some 0.5% minutes after the opening bell, Japan’s Nikkei and Australia’s S&P/ASX 200 were recently down 0.2% and 0.1%, respectively. Meanwhile, Hong Kong’s Hang Seng Index rose 0.4% amid gains in companies based in mainland China. Stocks and bonds in China started higher amid signs Beijing is taking a softer approach to reduce leverage and prevent risk in the debt-laden financial system.
China’s official Xinhua News Agency ran an unexpected editorial Sunday night that urged financial regulators to avoid enabling the recent campaign to prevent risk to actually create more risk. Meanwhile, Premier Li Keqiang stressed during a cabinet meeting Sunday the importance of striking a balance among maintaining financial stability, gradual deleveraging and stabilizing economic growth.
Ten-year Chinese government bond yields fell to 3.6% from 3.66% on Friday, and the Shanghai and Shenzhen composites gained some 0.4%, among the biggest gains in the region Monday.
U.S. stocks edged lower Friday, as the latest batch of U.S. economic data fell short of expectations.
The lackluster readings follow a string of soft first-quarter data. Investors have largely brushed off signs of weak economic growth in 2017 on the rationale that the first few months of the year tend to be slow and corporate earnings have been stronger than expected. U.S. stocks are hovering close to record highs, while volatility has fallen to historical lows.
The Dow Jones Industrial Average fell 0.1%, to 20897, the S&P 500 dropped 0.2%, and the Nasdaq Composite edged up 0.1%.
Renault was scrambling Sunday to resume operations at plants across Europe after its computer systems were hit by a virus that swept the globe.
A Renault spokesman said the manufacturer was forced to halt production at plants in France, Romania and Slovenia after the firm’s IT security team spotted the so-called “ransomware” worm in its systems around midnight on Friday.
The dollar fell below its 200-day moving average during Friday’s U.S. session, undermined by slower inflation and disappointing retail sales growth that weighed on U.S. interest rate expectations. expectations of 2%. Meanwhile, the US retail sales control group rose by just 0.2% on-month in April (consensus 0.4%).
CBA said it sees scope for the dollar to correct modestly lower this week because there are no policy-relevant U.S. economic data releases, which means interest rate expectations will not re-adjust higher.
Despite growing geopolitical risk on the Korean peninsula, the dollar was little changed in Asia from late-Friday levels in New York because yen buying and selling is “surprisingly well-balanced,” said Takahiro Sekido at Bank of Tokyo-Mitsubishi UFJ.
Geopolitical risk supports yen-buying, while yen-selling has been steady as Japanese investors start to make foreign-bond purchases. “These factors make for low volatility,” Mr. Sekido said.
At 0350 GMT, USD/JPY was 113.38-39, EUR/USD was 1.0929-32 and GBP/USD was 1.2897-99.
U.S. government bonds strengthened Friday, dropping the yield on the 10-year note back toward 2.3% as a new report showed softer-than-expected inflation.
Demand for bonds pushed the yield on the benchmark 10-year Treasury note down to 2.331%, compared with 2.400% Thursday and 2.352% a week ago.
Oil prices surged in Asian trading as the market wavered between a possible OPEC agreement to extend production cuts and continued growth in U.S. oil-drilling activities. Meanwhile, Libya said its output has topped 800,000 barrels/day, the most in 2 1/2 years.
Oil futures rebounded 3.5% last week after the prior week’s pummelling, and ANZ said a looming OPEC deal “should provide some support to oil prices this week.”
At 0403 GMT, June Nymex was up 71 cents at $48.55/barrel and July Brent was 74 cents higher at $51.58
London spot-gold prices inched higher in early Asian trading with North Korea’s latest missile launch and a potential further rebound in oil, which could cause some investors to focus anew on inflation, supporting sentiment.
At 0248 GMT, gold was up $1.08 at $1,229.41/troy ounce, although it remains near 7-week lows.
Dow Jones Newswires , 16 May 2017 12:09
European Morning Briefing: Stocks to Stutter; Euro Prospects Improve
Stocks seen flat; EUR/USD 1.0986-89; Bund yield 0.422%; Brent crude $52.00; gold $1234.24
-Germany’s Merkel Advocates German-French Cooperation in Meeting With Macron
-U.K. International Trade Secretary: We Are Prepared to Be Free-Trade Champions
-Researchers Identify Clue Connecting Ransomware Assault to Group Tied to North Korea
Watch For: Eurozone GDP, foreign trade; Germany ZEW Indicator; U.K. inflation; Italy GDP; IEA oil market report; earnings from easyJet, Vodafone; U.S. earnings from Home Depot, Staples, Urban Outfitters
Angela Merkel said Monday that she was open to changing the European Union’s treaties to strengthen the bloc, voicing a desire to work closely with France as she met with Emmanuel Macron on his first full day in office.
Ms. Merkel said she and Mr. Macron had agreed to “develop anew” their bilateral relationship and that their cabinet ministers would meet shortly after the French parliamentary election in June. In a sign that she was prepared to discuss far-reaching changes to the EU and the eurozone with Mr. Macron, she said she would be prepared to support changing EU treaties “if it makes sense.”
“First we will work on what we want to do, and if it then demands a treaty change I, at least, will be ready to do it,” Ms. Merkel said.
Ms. Merkel said the election of Mr. Macron, who ran on a centrist, pro-EU platform pledging reforms, offered an opportunity to improve the bloc.
“The French elections, also the Dutch elections, have shown the Germans once more what a treasure Europe is and how important German-French cooperation and friendship is for this treasure,” Ms. Merkel said. “So I believe we are at a very sensitive moment in history that we should now also use to make something of it that will be understood by the people as a strengthening of Europe and a fortification of Europe.”
The U.K.’s top trade official said that Britain would be a leading advocate for free trade despite its plans to leave the European Union.
Liam Fox, the U.K.’s international trade secretary, said the Brexit process would give Britain back an independent trade policy for the first time in four decades. But Mr. Fox said the U.K. wasn’t pursuing a policy of isolationism.
Instead, the U.K.’s departure from the EU political framework would give it more freedom to pursue a free trade agenda, Mr. Fox said.
Mr. Fox was also critical of other nations for a slowdown in international trade due to rising protectionism, calling members of the Group of Seven nations some of the worst offenders. He didn’t name specific countries.
Cybersecurity researchers identified a digital clue connecting the global ransomware assault to previous cyberattacks by a group linked to North Korea.
The link involves a version of the software used in the latest attack, known as WannaCry, that was detected earlier this year and uploaded to an archive for security researchers.
Neel Mehta, a security researcher at Google, on Monday pointed out similarities between that earlier WannaCry variant and code used in a series of attacks that security specialists have attributed to the Lazarus group.
Security experts say that hacking group carried out a series of multimillion-dollar online banking thefts as well as the 2014 cyberattacks on Sony Entertainment — attacks they believe North Korea orchestrated.
The rally in European stocks could falter Tuesday, with futures for the DAX and FTSE 100 unchanged, although analysts expect further gains are likely.
“It’s tough to be anything else other than bullish on risk assets at the moment and while implied volatility is extremely low global equity markets continue to creep higher,” wrote IG’s Chris Weston.
“The mood on the street still doesn’t feel overly bullish in any way, but look around the markets and we see new highs in the FTSE 100, DAX, S&P 500, NASDAQ 100 and a new high in the MSCI World index should be in play this week. Emerging markets are flying too and attracting heavy inflows into equity and bond funds,” Mr. Weston added.
Stock markets across Asia-Pacific lacked direction early Tuesday, with gains for regional energy and mining firms thanks to a jump in commodity prices, while Chinese markets again succumbed to selling pressure.
After two sessions in the red, Japan’s headline stock index rose and closed in on the key 20000-point level, helped by gains in energy stocks. Elsewhere, a boost from commodity-exposed stocks lifted Australia’s S&P/ASX 200 by 0.2%
Meanwhile, Chinese markets were markedly lower, after data on Monday disappointed with retail sales and industrial production seeing slower growth in April, while fixed asset investment in the first four months of the year failed to meet expectations, rising just 8.9% compared with the same period the year before.
The Shanghai Composite Index was last down 0.7%, while the Shenzhen Composite Index was off 0.5%. In Hong Kong, the Hang Seng Index was off 0.3%.
U.S. stocks rose Monday as a jump in commodities prices boosted shares of energy and mining companies.
The Dow Jones Industrial Average gained 0.4%, the S&P 500 rose 0.5% and the Nasdaq Composite added 0.5%. Both the S&P 500 and Nasdaq reached fresh highs.
EUR/USD extended its rally in Asia on a weaker dollar and encouraging Eurozone political developments, said CBA.
Angela Merkel and Emmanuel Macron pledged to co-operate on a “road map” of pro-growth economic reforms for the European Union while Mr. Macron’s appointment of Edouard Philippe as France’s new prime minister raises the likelihood the new French president will manage to win a majority at the June legislative election. This will ultimately allow him to implement his pro-growth economic reforms in France, said CBA.
The dollar was hurt Monday by a surge in oil-dependent currencies and disappointing U.S. data. The buck fell 0.5% against the Canadian dollar, 1.3% against the Russian ruble and 0.1% against the Norwegian krone. Meanwhile, a closely watched measure of inflation came in below expectations on Friday, a potential obstacle for the Federal Reserve as it seeks to normalize interest rates. Signs that inflation has firmed would bolster the Fed’s case for raising rates more aggressively.
Federal-funds futures, used by investors to bet on the U.S. interest-rate outlook, show a 74% chance that the Fed will raise rates at its meeting in June, according to CME Group data. That is down from 83% a week earlier.
Investors continue to assess the outlook for the Trump administration’s tax-overhaul and stimulus plans, which were expected to bolster the U.S. economy and the dollar.
“The broader issue for the U.S. dollar is perhaps the hangover from recent developments in Washington which has slowed President Donald Trump’s pro-growth/business agenda,” said analysts at Scotiabank in a research note. ” Getting Washington back on track will help lift the [dollar].”
The WSJ Dollar Index, which measures the U.S. currency against 16 others, continued to fall in Asia and was recently at 89.85.
U.S. government bonds pulled back Monday as investors took some chips off the table after the biggest price rally in nearly a month at the end of last week.
The yield on the benchmark 10-year Treasury note settled at 2.338%, compared with 2.331% Friday.
One factor sapping demand for haven bonds: German Chancellor Angela Merkel’s party-Christian Democratic Union-prevailed in elections Sunday in North Rhine-Westphalia, the most popular state in Germany. Analysts took it as a sign Ms. Merkel may fare well in the federal elections later this year. The news followed the presidential elections in France, which reduces political anxiety in Europe.
Crude oil futures were up in Asia trade, with prices headed closer to U.S. session highs, as expectations that OPEC will extend production cuts until early next year continued to boost trading sentiment.
“An extension of OPEC and Russia’s oil production cuts for another nine months should put a floor under the oil price in the mid-$40 range as the market inches gradually towards balance,” said Ric Spooner, chief market analyst at CMC Markets.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in June traded at $49.05 a barrel at 0242 GMT, up $0.20 in the Globex electronic session. July Brent crude on London’s ICE Futures exchange rose $0.18 to $52.00 a barrel.
Gold prices were at their highest level in two weeks in Asia, as some investors looked to safe-haven assets following the recent show of nuclear strength by North Korea and despite the prospect of another rate hike next month from the Federal Reserve.
“We are still constructive on gold,” said Daniel Hynes, commodities analyst with ANZ Bank. “Once we get through June, the market will warm up to other factors.”
He noted physical demand in India and China was stronger in April, though coming off low prior-year levels. At 0210 GMT, gold was up 0.3% at $1,234.24/troy ounce, having slid Monday during the U.S. session.
Dow Jones Newswires , 17 May 2017 11:55
European Morning Briefing: U.S. Politics Force Risk-Off Moves
Stocks to open lower; EUR/USD 1.1111-14; Bund yield 0.436%; Brent crude $51.21; gold $1242.40
-White House Turmoil Puts the GOP Agenda at Risk
-Trump Asked Comey to End Flynn Probe
-U.N. Security Council Holds Talks After North Korean Missile Launch
Watch For: Eurozone harmonised CPI; U.K. unemployment; Poland interest rate decision; European Commission President Jean-Claude Juncker and European Council President Donald Tusk present a report on the EU’s Brexit summit last month; earnings from ABN AMRO, British Land, SSE; U.S. earnings from Cisco, Target
The latest revelation to buffet the White House — that President Donald Trump allegedly asked then-FBI Director James Comey to drop a probe of his former national security adviser — has prompted some congressional Republicans to call for further investigation.
Mr. Comey documented the encounter in a memo written shortly after the February meeting, according to two people close to Mr. Comey. House Oversight and Government Reform Committee Chairman Jason Chaffetz said he was considering subpoenaing the memo, if it wasn’t made available. Mr. Chaffetz on Tuesday night requested the FBI provide by May 24 all memos, notes, summaries and recordings of communication between Mr. Trump and Mr. Comey in a letter to FBI Acting Director Andrew McCabe. The move was supported by House Speaker Paul Ryan.
“We need to have all the facts, and it is appropriate for the House Oversight Committee to request this memo,” AshLee Strong, a spokeswoman for Mr. Ryan, said in a statement.
Mr. Chaffetz insisted the House could get its business done despite the upheaval.
“The government is always full of crisis — some of this is very self-inflicted by the White House itself — but we still have to be able to pass meaningful legislation and get it to the president’s desk,” Mr. Chaffetz told NBC Tuesday night.
Other congressional Republicans called on Mr. Comey to deliver a full explanation.
The series of controversies involving the president has threatened to swamp his legislative agenda on Capitol Hill, with potential hearings and widening investigations siphoning time and energy from plans to overhaul the health-care system and tax code.
The United Nations Security Council on Tuesday held a closed-door, emergency meeting on North Korea, holding talks on new sanctions in response to the country’s latest ballistic missile test.
The U.S. and China were negotiating a resolution that would implement new sanctions and tighten existing penalties on Pyongyang, diplomats said. China is North Korea’s main ally at the U.N. and has in the past advocated for direct negotiations rather than economic and military punishment.
U.S. Ambassador Nikki Haley said that the international community had to send North Korea a “no more” signal and said the U.S. would be willing to talk to North Korea only if the country abandoned its nuclear and missile program.
“This is not play time. This is serious. These threats are not welcome,” said Ms. Haley, speaking to reporters before the Council meeting.
European stocks face opening losses Wednesday, with DAX futures down 69 points and FTSE 100 futures down 28 points.
A falling dollar pressured stocks in Japan and cast broader concern over equity markets in the region, as turmoil in Washington continued to raise doubts about the Trump administration’s ability to make progress on policy.
The Nikkei was recently down 0.4% while S&P 500 futures were 0.5% lower.
“U.S. dollar weakness has been a key feature of the market landscape over the past 24 hours,” noted Ric Spooner, chief market analyst at CMC Markets.
Australia’s benchmark stock index slid 1% as the country’s largest banks–which carry a great deal of weight in the S&P/ASX 200–dropped nearly 2%. Prime Minister Malcolm Turnbull said a proposed levy on the country’s five biggest banks is “a reasonable requirement” and they can easily afford it.
In Shanghai, stocks were recently up 0.1%. Benchmarks in Hong Kong and Seoul were down slightly.
Nasdaq notched a fresh record close Tuesday as shares of technology companies climbed in an otherwise downbeat session. The index rose 0.3%, its 33rd record close of the year. The Dow Jones Industrial Average and the S&P 500 each fell less than 0.1%.
The return of risk-off sentiment in global markets has hit the dollar and given a notable lift to the yen amid political drama in the U.S. and on the Korean peninsula.
The WSJ Dollar Index has fallen for five straight sessions and has continued to decline, putting it at its lowest level since November in dropping a further 0.1% in Asian trading.
A series of political blowups in recent days has cast fresh doubt on the pace of potential policy moves by the Trump Administration.
Buying of yen accelerated in Asian trading, with the dollar skidding toward Y112.50 and hitting a series of session lows Wednesday, versus around Y113.10 in late Tuesday action in New York. Masashi Murata, currency strategist at Brown Brothers Harriman in Tokyo, has put the next target at Y112.12.
Mr. Murata also said the euro’s ongoing rebound is not supported by strong fundamentals. “I don’t think it is sustainable.” Meanwhile, he doesn’t believe market chatter that the European Central Bank may move towards raising interest rates.
At 0350 GMT, USD/JPY was 112.42-43, EUR/USD was 1.1111-14 and GBP/USD was 1.2935-37.
U.S. government bonds gained ground Tuesday as uncertainty over the U.S. fiscal policy outlook and disappointing housing data stoked demand for haven assets.
The yield on the benchmark 10-year Treasury note settled at 2.329%, compared with 2.338% Monday as political worries continue to circulate in the U.S. Investors are concerned that these worries inject a layer of uncertainty surrounding the timing and details of large fiscal stimulus.
Crude oil prices retreated in Asia trade, weighed by renewed concerns that U.S. production is undercutting the global oil cartel’s efforts to put the market back to balance.
U.S. crude stockpiles likely rose by 882,000 barrels in the week ended May 12, according to industry group American Petroleum Institute. The Wall Street Journal’s survey of 13 analysts, however, estimates a decrease of 2.2 million barrels. Official readings from the Energy Information Administration are due later Wednesday.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in June traded at $48.20 a barrel at 0259 GMT, down $0.46 in the Globex electronic session. July Brent crude on London’s ICE Futures exchange fell $0.44 to $51.21 a barrel.
London spot gold prices climbed in Asia on renewed safe haven buying, bringing it close to the levels seen a fortnight ago.
Gold prices are expected to trade in a range of $1,200-$1,250 per ounce in the near term, said an ABN AMRO report, with prices seen rising later in the year to $1,300/oz. However, expectations of a U.S. rate rise may cap gains until next month. Physical demand in Asia has picked up, but typically demand tends to plateau during the summer months before rising again from August onwards.
At 0219 GMT, spot gold was trading $5.8 higher at $1,242.40/oz.
DJ App Dow Jones Newswires , 18 May 2017 05:05
European Morning Briefing: Trump Agenda Fears Continue to Damp Sentiment
Stocks to extend losses; EUR/USD 1.1159-62; Bund yield 0.378%; Brent crude $52.07; gold $1258.90
-EU Remains Skeptical of Laptop Flight Ban
-EU to Fine Facebook Over WhatsApp Acquisition
-Japan's Economy Extends Growth Sequence; Economy Minister Says Country Not Yet Out of Deflation
-BOJ's Iwata Says Central Bank Hasn't Decided on Stimulus Exit Plan
-Irish Prime Minister Kenny to Step Down
Watch For: Greek MPs vote on new austerity measures; France ILO unemployment; U.K. retail sales; earnings from 3i Group, Investec, Merck KGaA
The U.S. government made its case to European officials on Wednesday on why it may expand a ban on laptops in airplane cabins to flights to the U.S. from Europe, despite strong opposition from the airline industry.
Washington has been weighing whether to include flights arriving from Europe in an existing ban on passengers taking laptops, tablets and other larger electronic devices on flights originating from 10 Middle East and North Africa airports. The Trump administration imposed the ban in March, citing security concerns.
European officials have expressed frustration over U.S. reluctance to share specific details about why it imposed the existing ban. President Donald Trump last week shared information on the threat to planes with Russian officials. The information had been collected by Israeli intelligence and was meant for U.S. eyes only, U.S. officials familiar with the matter said.
No decision was taken on whether to expand the ban to other countries including Europe, a U.S. administration official said, adding Washington was still considering the possibility in light of threats and "innovative methods" terrorists are devising to smuggle explosives aboard planes in consumer devices.
The European Union's antitrust watchdog is poised to fine Facebook on Thursday for giving "incorrect or misleading information" to investigators who were probing its purchase of chat app WhatsApp in 2014, according to people familiar with the matter.
The European Commission's fine is expected to be "significant" to set an example for other companies registering their mergers for review with EU authorities, according to one of the people familiar with the matter.
The commission could fine the company up to 1% of its world-wide revenue. That could work out to as much as $276 million based on Facebook's 2016 revenue.
Japan's economy picked up speed in the first three months of 2017, extending its most recent stretch of growth under Prime Minister Shinzo Abe to five quarters, the longest expansion in Japan since 2006.
Stronger global demand especially for tech-related items and an improvement in household spending in the first quarter helped push up gross domestic product by 2.2% on an annualized basis from the previous three months. The pace of expansion was faster than a growth rate of 1.8% forecast by economists polled by The Wall Street Journal.
Bank of Japan Deputy Gov. Kikuo Iwata said Thursday that the central bank hasn't decided on how it would unwind stimulus policies.
"When we face the need for a stimulus exit in the future, raising interest rates on banks' deposits at the BOJ can be one option of raising short-term interest rates," Mr. Iwata said.
European stocks face further losses Thursday, extending a global selloff as doubts have increased that the Trump administration would be able to deliver on its policy goals due to mounting political problems.
At 0341 GMT, DAX futures were down 50 points and FTSE 100 futures were down 31 points.
The latest political developments have put President Donald Trump's administration on the defensive and investors world-wide are more worried about his ability to push through proposals on tax cuts, deregulation and infrastructure spending.
"It appears the market has come alive with the dynamic of volatility, which will no doubt be welcomed by many of the shorter-term traders out there," wrote IG's Chris Weston.
"That being said when so many global markets were at multi-year, if not all-time highs, you know there would be some pain being felt out on the floors today," Mr. Weston noted.
Asian equity markets were broadly lower, with Japan's Nikkei Stock Average down 1.4% and Australia's S&P/ASX 200 down 1.2%.
"Markets have begun to price in a substantial delay in enacting Trump's signature tax reforms legislation," said Zhu Huani, an economist at Mizuho Bank in Singapore.
Meanwhile, stocks in China were more resilient, as expectations for more infrastructure spending--particularly focused on a new economic region near Beijing--boosted construction and property stocks.
The Shanghai Composite Index and Shenzhen Composite Index were both down 0.3%, while Hong Kong's Hang Seng Index was 0.2% lower.
U.S. stocks slid Wednesday, with the Dow Jones Industrial Average closing down 373 points, or 1.8%, to 20607. The S&P 500 fell 1.8% and Nasdaq lost 2.6%.
The dollar steadied somewhat in Asian trade having sank Wednesday, giving back its postelection rally as confidence in the Trump administration's ability to deliver on its economic proposals waned.
"The administration's ability to push some of these things through over a reasonable time frame may well be compromised," said Shaun Osborne, chief foreign-exchange strategist at Scotiabank. "It's certainly conceivable..that the dollar rally has topped out."
The dollar slid 1.5% against the Japanese yen, which investors often flock to during times of market uncertainty. Hedge funds and other speculative investors cut bullish bets on the dollar to $11.8 billion in the week through May 9, the lowest level since early October, according to the Commodity Futures Trading Commission. Bets on a stronger dollar had swelled above $28 billion in December.
At 0350 GMT USD/JPY was 111.03-04, EUR/USD was 1.1159-62 and GBP/USD was 1.2965-67.
U.S. government bonds posted the biggest one-day rally in nearly a year Wednesday as U.S. political jitters drove investors into the bunker of haven assets.
The 10-year Treasury yield settled at 2.216%, the lowest close since April 19, down from 2.329% Tuesday. It was the yield's biggest one-day slide since June 27, 2016 when investors rushed into the bunker of Treasury debt following the U.K.'s referendum to leave the European Union.
The yield premium investors demanded to hold the 10-year Treasury note relative to the two-year note fell to 0.96 percentage point, the lowest since late October. Other haven assets also gained ground, including German bunds and U.K. gilts.
Japanese super-long government-bond yields were lower Thursday, with the 20-year yield down 0.02 percentage point at 0.57% while the 40-year dropped 2.5 basis points to 1.035%.
Oil eased back slightly in Asian trading following gains in the U.S. after data showed that stockpiles of oil and fuel continued to drop and oil production fell for the first time since February.
U.S. oil stocks fell by 1.75 million barrels last week-the sixth consecutive weekly decline-as refiners ramped up their purchases of crude, according to the U.S. Energy Information Administration.
The decline fell short of the 2.2-million-barrel decline forecast by analysts and traders surveyed by The Wall Street Journal, but was a more bullish figure than the 882,000-barrel-increase reported Tuesday by the American Petroleum Institute.
CBA's Vivek Dhar is upbeat about oil's near-term direction ahead of next week's OPEC meeting, adding that recent dollar weakness is good for the commodity.
At 0341 GMT, June WTI futures were 0.3% lower at $48.93/barrel and July Brent was down 0.2% at $52.07.
Following gold futures' biggest gain in 2 months during the U.S. session, prices edged lower in Asia Thursday.
"Gold is likely to remain a sought-after asset," said ANZ. The dollar has fallen to 7-month lows, good for the safe-haven asset, as is the selloff in equities.
At 0211 GMT, spot gold was down 0.2% at $1,258.90/troy ounce.
(MORE TO FOLLOW) Dow Jones Newswires
May 18, 2017 00:05 ET (04:05 GMT)
2017 Dow Jones & Company, Inc.
Dow Jones Newswires , 18 May 2017 05:05
European Morning Briefing: Other Top Stories
Republicans Back More Active Role in Trump Probes
Congress is ratcheting up its investigative and oversight apparatus by seeking documents, memos and other evidence related to the controversies that have buffeted President Donald Trump in recent weeks. Congress Steps Up Probes Into Comey and Russia
Donald Trump Meets With Four Candidates to Lead FBI
President Donald Trump is meeting on Wednesday with four candidates to lead the Federal Bureau of Investigation, including Acting Director Andrew McCabe and former Sen. Joe Lieberman, the White House said Wednesday. Donald Trump Meets With Four Candidates to Lead FBI
Dow Jones Newswires , 19 May 2017 12:03
European Morning Briefing: Stocks to Steady But Doubts Remain
Stocks to post modest rebound; EUR/USD 1.1108-11; Bund yield 0.347%; Brent crude $52.86; gold $1249.55
-Greece’s Parliament Approves New Cuts, Austerity Measures
-Mester Says Fed Should Press Forward With Rate Rises
-Trump Denies He Asked Comey to End Flynn Probe
Watch For: Eurozone current account, flash consumer confidence indicator; Italy balance of payments; earnings from Euronext
Greece’s Parliament approved late Thursday a raft of fresh austerity measures and economic reforms that the country must implement in the next four years to unlock a much-needed cash payment to meet upcoming debt obligations.
Meanwhile, Greece’s most influential creditors — Germany and the International Monetary Fund — remain deadlocked over debt restructuring.
The measures, totaling more than EUR4 billion, were passed by a vote of 153 lawmakers from the ruling left-wing Syriza party and its junior coalition partner, the Independent Greeks, securing a majority in the 300-seat parliament.
The approval paves the way for eurozone finance ministers to clear the next disbursement of funds to Greece when they meet Monday. At that Eurogroup meeting, they will also discuss ways to lighten the country’s crushing debt burden.
Optimism is growing for a breakthrough at the meeting, but many obstacles remain. Officials involved in the talks warn existing disagreements could delay any deal to mid-June.
The IMF and Germany have argued over how tight a budget Athens must maintain in future years to receive debt relief. However, according to several EU officials, the creditors have now agreed that Greece needs to maintain high primary surpluses of 3.5% of its gross domestic product for the next five years.
Federal Reserve Bank of Cleveland President Loretta Mester offered an upbeat economic outlook Thursday and said more rate rises lie ahead for the central bank.
“I don’t believe that removing accommodation calls for an increase in the fed-funds rate at each meeting, but I do anticipate more than the one increase per year seen in the past two years,” Ms. Mester said. A steady course of rate rises “will help prolong the expansion, not curtail it,” and “it will help avoid a buildup of risks to macroeconomic stability that could arise if the economy is allowed to overheat.”
But the policy maker declined to say when she would like the Fed to boost the cost of borrowing. She said, “I don’t usually give a date, because we are dependent on how the economy evolves.”
Ms. Mester added: “The exact timing of when and where is not the way I like to view policy. I like to view policy in terms of a path, and whether it’s consistent with my…outlook, and the progress we’ve made.”
President Donald Trump flatly denied that he asked former FBI Director James Comey to end his investigation of former National Security adviser Mike Flynn.
At a press conference Thursday alongside Colombia’s president, Mr. Trump was asked whether he had asked Mr. Comey to end his probe. Mr. Trump responded: “No. No. Next question.”
On Thursday, Mr. Trump also reiterated his position that he never colluded with Russia during last year’s election, although he left open the possibility that others may have done so.
“Believe me, there’s no collusion,” the president said, before adding a qualification: “I can only speak for myself.”
European stocks should start Friday’s session in positive territory following Wall Street’s rebound, with DAX futures up 9 points and FTSE 100 futures up 26 points.
Stock markets in the Asia-Pacific region were mostly steady but caution dominated as investors continue to take a wait-and-see approach amid the week’s developments, which were centered on U.S. politics but also included troubles in Brazil after asset prices there plunged on Thursday amid a scandal involving that country’s president.
After two days of selling, Asian stocks appear to be consolidating.
“However, I think that a lot of traders are probably yet to be convinced that we have seen the end of this turmoil, and that I think this accounts for the steady market action with no real signs of any bargain-hunting” early Friday, said Ric Spooner, chief market analyst at CMC Markets.
Australia again underperformed the region as stocks continue to be pressured by a proposed bank tax on the nation’s biggest lenders. The headline stock index was down 0.5%, putting the week’s decline above 2% and on pace for its worst week since October.
Other markets were more muted, with the Nikkei Stock Average down 0.2% ahead of the midday break and the Hang Seng up 0.1%.
U.S. stocks jumped Thursday as investors piled into shares of financial and technology companies.
The Dow industrials rose 0.3%, the S&P 500 added 0.4%, and the Nasdaq Composite rose 0.7%.
Several traders said they couldn’t point to any specific news behind the moves, which intensified in afternoon trade. Some said buyers were likely stepping in to take advantage of Wednesday’s selloff, which sent the Dow industrials on its steepest one-day decline since September.
“A one-day move didn’t cause any panic,” said Mohit Bajaj, director of ETF trading solutions at brokerage WallachBeth Capital.
The dollar edged slightly lower in Asia, having rebounded Thursday.
The WSJ Dollar Index, which measures the U.S. currency against 16 others, was recently down 0.1% at 89.17. The index had gained 0.2% during the U.S. session.
Markets have been rattled by reports that President Donald Trump shared sensitive information with Russian officials and asked then-FBI Director James Comey to back off an investigation of former national security adviser Michael Flynn.
Brad Bechtel, a currency strategist at Jefferies Group, said the political unease “detracts from the economic policies the administration was trying to put into place.” Still, he thinks the dollar could rise in the months ahead as the Federal Reserve moves to raise interest rates.
“You cant ignore the fact that the Fed is tightening, that the U.S. economy is trucking along,” he said. “In the end, the dollar will continue to rise.”
At 0350 GMT, USD/JPY was 111.25-26, EUR/USD was 1.1108-11 and GBP/USD was 1.2954-56.
U.S. government bonds pulled back Thursday after the biggest one-day price rally in nearly a year.
Demand for haven bonds retreated as upbeat labor market and manufacturing data deflated some worries over the U.S. growth outlook, offsetting political uncertainty surrounding the Trump administration and a brewing political crisis in Brazil.
“The economic fundamentals remain solid,” said Eric Souza, senior portfolio manager at SVB Asset Management. “We are monitoring the (political) developments. I don’t think anybody dramatically changes their asset allocation strategy at this point.”
The yield on the benchmark 10-year Treasury note closed at 2.233%, compared with 2.216% Wednesday. Demand for a $11 billion sale of 10-year Treasury inflation-protected securities soared, another sign the calmer tone in financial markets encouraged some investors to embrace risks.
Oil futures extended gains in Asia Friday as optimism about production cuts being extended next week outweighed ongoing concerns about abundant supply.
OPEC members such as Algeria voiced support for extending the agreement until next March. There is a possibility that participants may look at deeper cuts, although chances of that look slim, analysts said.
At 0359 GMT, June WTI futures rose 0.8% to $49.73/barrel and July Brent was up 0.7% at $52.86/barrel.
London spot-gold prices ticked up in Asia following a pullback in the U.S. amid dollar strength and some easing to midweek risk-off sentiment.
With expectations of a June rate hike, which is liable to weigh on prices, “we see downside pressure building on gold,” said CBA, adding that safe-haven demand due to political tensions may continue to support the metal depending on how events unfold.
At 0254 GMT, gold was up 0.3% at $1,249.55/troy ounce.