Global stocks nurse 9-month highs aims ECB meet­ing

The Pak Banker - - MARKETS/SPORTS -

World stocks hit near nine-month highs on Thurs­day as talk of another su­per-sized shot of stim­u­lus from Ja­pan helped buoy the mood ahead of the Euro­pean Cen­tral Bank's first post-Brexit meet­ing. The yen had hit a six-week low on re­ports Tokyo was con­sid­er­ing a pack­age of at least 20 tril­lion yen to boost the econ­omy. It later jumped 1 per­cent, how­ever, after Bank of Ja­pan chief Haruhiko Kuroda ruled out "he­li­copter money" which would ef­fec­tively give cash di­rectly to the pop­u­la­tion.

MSCI's 46-coun­try All-World share in­dex .MIWD00000PUS was at its high­est level since early Novem­ber as Europe's main bourses started the day broadly steady de­spite a tum­ble in air­line stocks. In­dus­try bell­wethers easyJet and Lufthansa both warned of a wors­en­ing out­look, with the Ger­man firm drop­ping over 6 per­cent after say­ing book­ings had been hit hard by "ter­ror­ist at­tacks in Europe and greater po­lit­i­cal and eco­nomic un­cer­tainty". ECB pol­i­cy­mak­ers meet­ing in Frankfurt must con­sider a list of con­cerns in­clud­ing the im­pact of Bri­tain's vote to leave the Euro­pean Union, a po­ten­tial Ital­ian bank­ing cri­sis and sug­ges­tions the ECB is run­ning out of pol­icy am­mu­ni­tion.

The euro was touch higher at $1.1025 EUR= hav­ing fallen for 10 of the last 14 weeks, while Ger­man DE10YT=TWEB and other core euro zone gov­ern­ment bond yields nudged up to their high­est lev­els of the month so far. "We are not ex­pect­ing any­thing in terms of ac­tion from the ECB to­day be­cause Draghi and his col­leagues won't have had enough data to see an im­pact of the UK EU ref­er­en­dum vote," said Vasileios Gkion­akis, head of FX strat­egy at UniCredit in Lon­don. "We think a some point be­tween Septem­ber to De­cem­ber we will get another ex­ten­sion of the QE pro­gramme in terms of time­frame, but we don't think they will go down the line of another de­posit rate cut."

Turk­ish as­sets strug­gled again after Pres­i­dent Tayyip Er­do­gan de­clared a state of emer­gency on Wed­nes­day, widen­ing a crack­down against thou­sands of mem­bers of the se­cu­rity forces, ju­di­ciary, civil ser­vice and academia after Fri­day's failed mil­i­tary coup.

Is­tan­bul's main stock mar­ket slumped 3.3 per­cent .XU100 in a fourth day of falls, al­though the lira TRY= man­aged to claw back 0.25 per­cent after plung­ing below the big fig­ure of 3 to the dol­lar.

Turkey apart, emerg­ing mar­kets are en­joy­ing a hot streak. In­flows to EM as­sets hit their high­est level in nearly three years last week, ac­cord­ing to the lat­est sur­vey by the In­sti­tute of In­ter­na­tional Fi­nance.

Fu­tures prices ESc1 pointed to a steady start for record high Wall Street mar­kets .SPX.DJI when they re­sume later. Overnight, MSCI's broad­est in­dex of Asia- Pa­cific shares out­side Ja­pan .MIAPJ0000PUS had risen to its high­est level since Oc­to­ber 2015, tak­ing gains over the last month past 10 per­cent in the process. Ja­pan's Nikkei stock in­dex N225 out­per­formed as it rose 1 per­cent on re­ports that the gov­ern­ment is to com­pile a stim­u­lus pack­age of at least 20 tril­lion yen to help the econ­omy. "What the mar­ket wants now is both fis­cal and mon­e­tary pol­icy and such ex­pec­ta­tions are get­ting higher," said Hikaru Sato, a se­nior tech­ni­cal an­a­lyst at Daiwa Se­cu­ri­ties.

The dol­lar rose 0.2 per­cent to 107 yen JPY= after climb­ing as high as 107.460 ear­lier, its high­est since June 7 and re­turn­ing to lev­els seen be­fore mar­kets were roiled by Bri­tain's vote last month to exit the Euro­pean Union. The dol­lar in­dex, which tracks the green­back against a bas­ket of six main world cur­ren­cies, dipped in Europe to 96.884 DXY hav­ing touched its high­est level since early March on Wed­nes­day.

In com­mod­ity mar­kets, oil was be­gin­ning to back­slide. Brent crude LCOc1 nudged back to­wards $47 a bar­rel hav­ing been as high as $47.35 in Asia, while U.S. crude CLc1 was flat at $45.73 a bar­rel. That gave a boost to safe-haven gold XAU=, which edged up 0.3 per­cent to $1,320 an ounce after plumb­ing three-week lows on Wed­nes­day. "With gold look­ing in­creas­ingly shaky on the charts, all eyes will turn to the ECB pol­icy meet­ing," said INTL FCS­tone an­a­lyst Ed­ward Meir.

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