Speculation about the possibility of Chinese stimulus got a boost
when Premier Li Keqiang was quoted by state media as saying the
government would roll out targeted measures step by step to aid the
Shares in Shanghai edged up 0.5 percent, while MSCI's index of
Asia-Pacific shares outside Japan <.MIAPJ0000PUS> added 0.6 percent.
Japan's Nikkei <.N225> was flat as trading wound down ahead of the
end of the financial year on March 31.
All the talk of a possible easing by the ECB pulled down bond yields
across the European Union and undermined the euro.
Peripheral European bond yields hit a multi-year trough on Thursday
while the premium that U.S. two-year debt pays over German paper
widened to its fattest since late 2012.
That saw the euro peel off to $1.3744 and a long way from the March
peak of $1.3967. Its largest losses came against the New Zealand
dollar which has been on a tear since the country's central bank
raised interest rates a couple of weeks ago.
The Reserve Bank of New Zealand has all but promised to hike rates
several more times this year, setting it far apart from other
developed nations and sending its currency to a two-and-a-half year
peak on the U.S. dollar.
Asian stocks had got little inspiration from Wall Street, where the
Dow <.DJI> and the S&P 500 <.SPX> both ended a fraction lower. The
Nasdaq <.IXIC> extended its recent pullback with a loss of 0.54
Yet the sluggishness of U.S. stocks contrasts with a sudden revival
in emerging markets, leading some to suspect that stretched
valuations on Wall Street are prompting fund managers to go bargain
The MSCI index of emerging shares <.MSCIEF> has climbed for six
straight sessions to the highest in almost three months. The index
for Latin America <.MILA00000PUS> on Thursday boasted its biggest
daily gain since July 2012 as Brazilian markets rallied.
[to top of second column]
TREASURIES IN DEMAND
In debt markets, a sale of U.S. seven-year Treasury paper drew red
hot demand, just as a five-year auction had on Wednesday. Direct
bidders, which include central banks, took a record share of the
sale, leaving dealers scrambling to cover short positions.
The demand for U.S. debt also showed up in the amount of Treasuries
that the Federal Reserve holds on behalf of foreign central banks,
which surged by a record $56 billion in the week to Thursday, on top
of a $32 billion jump the previous week.
The inflow almost entirely reversed a mysterious $104 billion drop
three weeks ago that many had thought was due to Russia pulling its
money out of the U.S. to avoid possible sanctions over Ukraine.
Whatever the source of the demand it has helped drag down
longer-term U.S. yields and contributed to a marked flattening of
the yield curve. The spread between five-year notes and thirty-year
bonds has shrunk to its smallest in five years.
The shift also reflects speculation that U.S. interest rates will
rise sooner than first thought and thus keep inflation well
contained below 2 percent.
The downward revision in the market's inflation expectations might
also be one reason gold has taken a turn for the worse in recent
sessions. On Friday, the metal was stuck at $1,292.56 an ounce
having lost 7 percent in nine sessions.
In the oil market, Brent eased 16 cents to $107.67 a barrel, while
U.S. crude futures edged up 4 cents to $101.32.
(Editing by Shri Navaratnam)
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