Euro and stocks hold gains ahead of ECB

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