Euro hits near 3-week high, China sub­dues Asia

Kuwait Times - - Business -

LON­DON: Strong Ger­man eco­nomic growth data drove the euro to a three-week high and its big­gest rise in a month yes­ter­day, though it dented Euro­pean stocks again as they shuf­fled back to a two-month low.

US stock index fu­tures pointed to a mixed open­ing for Wall Street, with wor­ries about Repub­li­can tax plans and the econ­omy’s abil­ity to deal with more rises in in­ter­est rates pre­vent­ing sharper gains.

The up­lift to Ger­man and euro zone sen­ti­ment came af­ter dis­ap­point­ing Chi­nese in­dus­trial and re­tail fig­ures had sub­dued Asia, with in­vestors also pon­der­ing whether a marked flat­ten­ing in the US yield curve might be a har­bin­ger of a more global slow­down. There was no sign of that in Ger­many where a 0.8 per­cent third-quar­ter growth read­ing beat fore­casts and showed the econ­omy ex­pand­ing at an­nu­al­ized rates of more than 3 per­cent. The euro jumped over $1.17 ver­sus the dol­lar on the fig­ures and reached a one-year top against Swe­den’s crown af­ter in­fla­tion fig­ures there came in weaker than ex­pected. “It is not the dol­lar that is weak, it is the euro that is strong,” said John Hardy, Saxo Bank’s head of FX strat­egy. “The next cou­ple of days will be im­por­tant to see where the euro closes for the di­rec­tion now in euro/dol­lar.”

Com­bined with signs of a move up again in Euro­pean bond yields, this sug­gested some traders were back to pric­ing in an end to the Euro­pean Cen­tral Bank’s stim­u­lus, he said.

Also keep­ing traders busy were 13 cen­tral bank speak­ers, in­clud­ing the heads of the US, Euro­pean, Bri­tish and Ja­panese cen­tral banks. The four were speak­ing to­gether at an ECB con­fer­ence in Frank­furt. They promised to keep openly guid­ing in­vestors about fu­ture pol­icy moves as they slowly with­draw the huge mon­e­tary stim­u­lus rolled out dur­ing the fi­nan­cial cri­sis. The mood in Asia hasn’t been nearly so bullish.

China’s re­tail sales rose 10 per­cent on the year in Oc­to­ber, while in­dus­trial out­put grew 6.2 per­cent. But both were un­der mar­ket fore­casts and briefly hit the Aus­tralian dol­lar, which is of­ten used as a liq­uid proxy for China be­cause of the coun­try’s vast ex­ports of raw ma­te­ri­als to China.

MSCI’s broad­est index of Asia-Pa­cific shares out­side Ja­pan dipped 0.17 per­cent af­ter two ses­sions of de­clines, while Aus­tralia fell 0.9 per­cent. Ja­pan’s Nikkei man­aged to re­coup 0.4 per­cent af­ter four ses­sions of losses, but that was not enough to shift MSCI’s 47-coun­try world index out of the red un­til Europe opened. Wall Street was set to open lower af­ter be­ing un­set­tled on Mon­day by a sharp drop in Gen­eral Elec­tric shares, though that had been off­set by gains in high div­i­dend­pay­ing sec­tors in­clud­ing con­sumer sta­ples and util­i­ties.

With Euro­pean shares back in the red for a fifth day in six, MSCI’s 47-coun­try “All world” index was also flirt­ing with its fourth down day, which would be its worst run since Au­gust.

Else­where, ster­ling dropped af­ter slightly softer than fore­cast in­fla­tion and hit a three-week low. It was at $1.3091, also pres­sured by con­cerns Bri­tish Prime Min­is­ter Theresa May might be los­ing her grip on power. May’s blue­print for Bri­tain’s de­par­ture from the Euro­pean Union faces a test start­ing on Tues­day, when law­mak­ers try to win con­ces­sions on leg­is­la­tion to sever ties.

The dol­lar drifted back 0.1 per­cent at 113.48 yen af­ter bounc­ing from 113.25 sup­port overnight. A rise in US bond yields has gen­er­ally made it more at­trac­tive to buy dol­lars with money bor­rowed in low-rate cur­ren­cies like the yen and Swiss franc. Fig­ures on Mon­day from the Com­mod­ity Fu­tures Trad­ing Com­mis­sion showed the net short po­si­tion in the Ja­panese yen to be the largest since Jan­uary 2014 and in the Swiss franc to the big­gest since De­cem­ber 2016. —Reuters

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