Global Markets: Dollar firms, stocks soar on ECB rate cut expectations

By Herbert Lash NEW YORK (Reuters) - U.S.

Reuters August 17, 2019 03:06:02 IST
Global Markets: Dollar firms, stocks soar on ECB rate cut expectations

Global Markets Dollar firms stocks soar on ECB rate cut expectations

By Herbert Lash

NEW YORK (Reuters) - U.S. and European stocks surged on Friday on expectations the European Central Bank will cut interest rates but the dollar pared gains against the euro after a report said the German government was prepared to take on new debt to lift the economy.

The dollar hit a two-week high against the euro as expectations of ECB stimulus weighed on the single currency and bullish data showing a jump in U.S. homebuilding permits to a seven-month high also helped lift the greenback.

But German and other euro zone government bond yields rose late Friday on a Der Spiegel report. Borrowing costs had plumbed new lows throughout the week as investors unnerved by the prospect of European recession piled into safer assets.

The euro rebounded to pare most losses after Der Spiegel magazine said the German government would be prepared to ditch its balanced budget rule and take on new debt to counter a possible recession.

Germany's Finance Ministry declined to comment on the report.

There has been a rising drumbeat of news recently from German politicians and businesses calling for a stimulus program, said Karl Schamotta, director of global markets strategy at Cambridge Global Payments in Toronto.

"Markets are still betting on a raft of stimulus measures from the ECB in September and that is having a pretty strongly negative effect on the euro," Schamotta said. "But in the near term, this idea that we could see more spending out of Germany is helping to alleviate that."

The German 10-year bund yield rose to a negative 0.688%, having earlier hit a record low of negative 0.727%. Rates turned negative in March and have trended lower since May.

The rebound in equity markets buoyed investor sentiment, though it is hard to say the recent rout has found a floor despite cheaper prices, said Yousef Abbasi, global market strategist at INTL-FCStone Financial in New York.

U.S. banks are likely to get cheaper because European banks are likely to do so if the ECB does not put together a credible off-set plan for further negative rates for banks, he said.

"That's the concern. Despite some equities looking attractive the macro concern is giving investors a reason to pause and not so aggressively buy the dip," Abbasi said.

Technology shares led Wall Street's advance but U.S. stocks posted a third straight week of declines, battered by the U.S.-China trade row and an "inversion" of 2- and 10-year bond yields that sparked fears of a recession.

MSCI's gauge of stock performance in 47 countries <.MIWD00000PUS> gained 1.18% and its emerging market <.MSCIEF> rose 0.69%. In Europe, the FTSEurofirst 300 <.FTEU3> index of leading regional shares closed 1.23%.

The Dow Jones Industrial Average <.DJI> rose 306.62 points, or 1.2%, to 25,886.01. The S&P 500 <.SPX> gained 41.08 points, or 1.44%, to 2,888.68 and the Nasdaq Composite <.IXIC> added 129.38 points, or 1.67%, to 7,895.99.

The euro earlier slid to $1.1090 , shy of a two-year low it set two weeks ago, on reports the ECB's Olli Rehn had suggested Thursday that a significant easing package was needed in September.

The dollar index <.DXY> rose 0.06%, with the euro down 0.15% to $1.1089. The Japanese yen weakened 0.23% versus the greenback at 106.35 per dollar.

The German 10-year bund posted a fifth straight week of declines, Italy's 10-year bond yield set its biggest weekly fall since late 1997 and the decline in Spanish 10-year yields were the largest since at least 1994 .

The benchmark 10-year U.S. Treasury notes fell 9/32 in price to push yields up to 1.5589%.

Crude oil prices recovered from two days of declines after data on Thursday, showing a rise in U.S. retail sales, helped ease recession concerns. A bearish outlook from OPEC capped gains.

Brent crude rose 41 cents to settle at $58.64 a barrel while U.S. crude settled 40 cents higher at $54.87 a barrel.

U.S. gold futures settled down 0.5% at $1,523.60 an ounce.

(Reporting by Herbert Lash, additional reporting by Saqib Iqbal Ahmed in New York; Editing by Nick Zieminski and Chizu Nomiyama)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:


also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.