World stocks wob­ble as stim­u­lus hopes fade

Kuwait Times - - BUSINESS -

LON­DON: World stocks mostly fell yes­ter­day as a broad rise in gov­ern­ment bond yields sug­gested in­vestors are ex­pect­ing less cen­tral bank stim­u­lus and higher in­ter­est rates than be­fore. France’s CAC 40 slipped 0.2 per­cent to 4,460 and Ger­many’s DAX was down 0.3 per­cent to 10,545. Bri­tain’s FTSE 100 fell 0.6 per­cent to 6,970. US shares were set to drift lower with Dow and S&P 500 fu­tures both down 0.1 per­cent. A drop in bond prices, which pushes up bond yields, in­di­cated that in­vestors are pre­dict­ing tighter mon­e­tary poli­cies from cen­tral banks. That in­cludes the pos­si­bil­ity of an in­ter­est rate in­crease in the US in com­ing months as well as po­ten­tially less stim­u­lus in the euro­zone and UK bond yields were ris­ing in many ad­vanced economies, par­tic­u­larly the US, UK and Ger­many, al­beit from near­record lows. Cen­tral bank stim­u­lus is cred­ited with prop­ping up com­pany share prices in re­cent years, so the pos­si­bil­ity of tighter money tends to weigh on stocks. “This move in bond mar­kets could well have fur­ther to run, par­tic­u­larly since we have in­fla­tion data out this week from Europe, the UK and the US, as well as the lat­est Euro­pean Cen­tral Bank rate meet­ing,” said Michael Hew­son, chief mar­ket an­a­lyst at CMC Mar­kets.


There will also be a lot of in­ter­est this week on a slew of quar­terly earn­ings re­ports in the US. Bank earn­ings will be a fea­ture of the week. Yes­ter­day, Bank of Amer­ica said its third-quar­ter prof­its rose nearly 6 per­cent from a year ear­lier, helped by strong re­sults in in­vest­ment bank­ing and trad­ing. The $4.45 bil­lion fig­ure bet­ter than an­a­lysts had ex­pected, lead­ing in­vestors to bid up the bank’s shares by 2 per­cent in pre-mar­ket trad­ing. The re­port fol­lowed bet­ter-than-ex­pected earn­ings from Cit­i­group and JPMor­gan Chase, and helped steady in­vestor nerves about a sec­tor that is ail­ing in Europe and seen a scan­dal en­gulf Wells Fargo. Most Asian mar­kets swung lower yes­ter­day fol­low­ing healthy gains at the end of last week, as in­vestors bet that the Fed­eral Re­serve will raise in­ter­est rates be­fore the end of the year. Shares had soared Fri­day after data showed the first rise in Chi­nese fac­tory prices for more than four years, fu­elling hopes the world’s num­ber two econ­omy is reach­ing the end of a years-long growth slow­down.

An­a­lysts said com­ments from Fed boss Janet Yellen Fri­day sug­gested the US cen­tral bank would raise bor­row­ing costs but at a steady pace. Yellen said run­ning a “high-pres­sure econ­omy” could help it over­come the dam­age caused by the global fi­nan­cial cri­sis. “If noth­ing else, this is another lower-for-longer pre­scrip­tion.

How­ever, these com­ments do not pre­clude a 25-ba­sis-point rate hike this year as another step in the nor­mal­iza­tion process,” Thomas Si­mons, se­nior economist at Jefferies LLC in New York, wrote in a note to clients. Most ex­perts pre­dict a rise by De­cem­ber at the lat­est and are closely watch­ing the re­lease this week of US in­dus­trial out­put and in­fla­tion data. The prospect of higher bor­row­ing costs weighed on Asian mar­kets in the morn­ing but some staged a re­cov­ery as the day wore on. Tokyo ended 0.3 per­cent higher, with a pick-up in the dol­lar against the yen help­ing ex­porters, while Seoul was 0.2 per­cent up. But Shang­hai closed 0.7 per­cent lower and Syd­ney shed 0.8 per­cent, while Sin­ga­pore sank 0.2 per­cent and Welling­ton tum­bled 0.9 per­cent.

Hong Kong was down 0.8 per­cent, with casino shares tak­ing a ham­mer­ing on news that 18 sales and mar­ket­ing staff of Aus­tralia’s Crown Re­sorts-in­clud­ing an ex­ec­u­tive in charge of lur­ing high-rollers to Aus­tralia-had been held in China. While it is not clear why they are be­ing ques­tioned, the Aus­tralian Broad­cast­ing Cor­po­ra­tion said it un­der­stood they were seized over so­lic­it­ing Chi­nese big spenders to gam­ble in over­seas casi­nos. “The casino in­dus­try is in a sen­si­tive po­si­tion as re­cent Chi­nese gov­ern­ment pol­icy has been anti-cor­rup­tion,” Ronald Wan, chief ex­ec­u­tive of Part­ners Cap­i­tal In­ter­na­tional in Hong Kong, told Bloomberg News. Sands China sank 3.3 per­cent, Wynn Ma­cau lost 2.7 per­cent and Galaxy En­ter­tain­ment dived 4.3 per­cent.

Ja­pan’s bench­mark Nikkei 225 wob­bled but fin­ished 0.3 per­cent higher at 16,900.12. South Korea’s Kospi rose 0.2 per­cent to 2,027.61, while Aus­tralia’s S&P/ASX 200 dipped 0.8 per­cent to 5,388.70. Hong Kong’s Hang Seng fell 0.8 per­cent to 23,037.54 and the Shang­hai Com­pos­ite in­dex fell 0.7 per­cent to 3,041.17.

The SET of Thai­land dropped 0.2 per­cent to 1,474.39 and other mar­kets in South­east Asia were mostly lower. In Syd­ney, Crown Re­sorts-owned by bil­lion­aire James Packer-plunged al­most 14 per­cent. Bangkok’s mar­ket dipped 0.2 per­cent, hav­ing soared Fri­day as news of the death of Thai­land’s king fu­elled bar­gain-buy­ing after heavy sell­ing in his fi­nal days. The dol­lar strength­ened Fri­day on the prospects of higher rates and main­tained its gains in Asia. The green­back bought 104.10 yen in Tokyo, from 104.16 yen in New York but still well up from the 103.66 yen Thurs­day. The euro bought $1.0985 from $1.0974 Fri­day but weaker than Thurs­day’s $1.1056. The pound re­mains bolted at three-decade lows as traders fret over Bri­tain’s plans to leave the Euro­pean Union.

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