Euro and stocks hold gains ahead of ECB

Kuwait Times - - BUSINESS - LON­DON: Oil, talk­ing Turkey

Wall Street’s record run looked set for a pause yes­ter­day as oil saw its first fall in five days and the euro held most of the wild three-cent gains it had seen in the wake of Italy’s ref­er­en­dum.

Fu­tures prices pointed lit­tle progress for US mar­kets fol­low­ing Mon­day’s record fin­ish on the Dow Jones de­spite a sec­ond day of Euro­pean gains and the strong­est ses­sion for Asia’s bourses in two weeks. Italy re­mained squarely in fo­cus, with sources telling Reuters that state aid had been pre­pared for the world’s old­est bank, Banca Monte dei Paschi di Siena, and a cru­cial Euro­pean Cen­tral Bank meet­ing loom­ing on Thurs­day.

Ital­ian shares jumped as much as 1.5 per­cent and its bond yields eased back to be­low pre­ref­er­en­dum lev­els, while the euro was at $1.0750, knocked just a touch by re­vived talk of a snap Ital­ian elec­tion. “I fore­cast there will be the will to go to elec­tions in Fe­bru­ary,” In­te­rior Min­is­ter An­gelino Al­fano, the head of a small cen­tre-right party that is a cru­cial part of Renzi’s rul­ing coali­tion, told an Ital­ian news­pa­per.

Shares had ear­lier been im­pressed by news that Ger­man in­dus­trial or­ders rose at their fastest pace for more than two years, stok­ing hopes that Europe’s largest econ­omy is set for an ac­cel­er­a­tion in the com­ing months. Fac­to­ries saw de­mand climb 4.9 per­cent on the month de­spite bulk or­ders be­ing lower than usual, the Ger­man econ­omy min­istry said.

That was the big­gest in­crease since July 2014 and far above the Reuters con­sen­sus fore­cast of a 0.6 per­cent rise. Data for all the world’s ma­jor economies have been de­liv­er­ing pos­i­tive sur­prises in re­cent weeks. “The read­ing was very strong even with­out large-scale or­ders and that sug­gests it’s more than just a flash in the pan,” Bay­ernLB economist Ste­fan Ki­par said of the Ger­man data, not­ing that some firms might have brought or­ders for­ward.

Oil prices snapped a four-day win­ning streak as data showed crude out­put rose in vir­tu­ally ev­ery ma­jor ex­port re­gion and it emerged that Saudi Aramco had cut its prices for next month to its big Asian cus­tomers. It jarred with last week’s first OPEC agree­ment since 2008 to cut out­put and sent Brent oil fu­tures down 20 cents to $54.75 a bar­rel and US crude down to $51.45.

Freight In­vestor Ser­vices In­ter­na­tional fuel bro­ker, Matt Stan­ley, said the oil mar­ket was try­ing to find “some kind of level it is happy set­tling at”. “I have a feel­ing it is more to­wards the $50 per bar­rel range than $55 per bar­rel, not least be­cause there is still am­bi­gu­ity around pro­duc­tion lev­els.”

Turkey’s lira, which has slumped to record lows in re­cent weeks, got some much needed re­lief as the head of the coun­try’s cen­tral bank warned the weak­ness could cause the bank to miss its in­fla­tion tar­gets. The US dol­lar started to find some trac­tion as New York trad­ing be­gan, hav­ing dipped to a near three­week low against other top cur­ren­cies.

Chicago Fed­eral Re­serve Pres­i­dent Charles Evans bol­stered bets on a US rate hike next month telling re­porters on Mon­day: “We are on the cusp of a pe­riod of ris­ing in­ter­est rates.”

Gold nudged off a 10-month low. MSCI’s broad­est in­dex for Asia bounced 0.7 per­cent, its big­gest daily rise since Nov. 22 overnight, as Korea climbed 1.4 per­cent and Ja­pan rose 0.4 per­cent.

Fi­nan­cial shares in China weak­ened again, af­ter the coun­try’s in­sur­ance reg­u­la­tor sus­pended an un­listed firm from sell­ing some prod­ucts a day af­ter a warn­ing about “bar­baric” share ac­qui­si­tions by as­set man­agers.

Mean­while, most Asian stocks ral­lied while the euro held up and high-yield­ing cur­ren­cies re­bounded yes­ter­day as in­vestors re­dis­cov­ered their ap­petite for risk af­ter the pre­vi­ous day’s losses fu­elled by Ital­ian un­cer­tainty.

On stock mar­kets Tokyo ended 0.5 per­cent higher, while Hong Kong was up 0.7 per­cent in the af­ter­noon. But Shang­hai ended down 0.2 per­cent. Sydney gained 0.5 per­cent, Seoul was 1.4 per­cent higher and Taipei put on one per­cent.

The gains were also prompted by the Dow’s sec­ond record close in three days, helped by a jump in ac­tiv­ity in the key US ser­vices sec­tor. The re­newed con­fi­dence pro­vided sup­port to Asia-Pa­cific cur­ren­cies that have taken a beat­ing in re­cent weeks be­cause of grow­ing ex­pec­ta­tions US bor­row­ing costs will be in­creased more sharply than pre­vi­ously thought. Aus­tralia’s dol­lar was up 0.4 per­cent against the green­back af­ter the coun­try’s cen­tral bank de­cided against cut­ting in­ter­est rates. But weak in­fla­tion fig­ures dented ear­lier ad­vances as pol­i­cy­mak­ers kept an open mind about a cut down the line.

South Korea’s won added 0.3 per­cent and the In­done­sian ru­piah gained 0.6 per­cent, while the Malaysian ring­git, New Zealand dol­lar and Sin­ga­pore dol­lar also posted healthy gains. — Agen­cies

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