flounder in Wall Street's wake, yen rises on BOJ
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[May 21, 2014]
By Nigel Stephenson
European stocks were under pressure on Wednesday,
spooked by overnight falls on Wall Street, and the
dollar fell against the yen as the Bank of Japan
suggested the world's third largest economy needed no
additional stimulus for now.
A broad flight to quality helped push low-risk German Bund futures
higher and weighed on lower-rated euro zone debt. Gold, also sought
as a safe haven, held steady.
Europe's FTSEurofirst 300 share index was down 0.02 percent by 4.15
a.m. EDT, extending the declines of recent days and taking it
further away from the 2014 peak it hit last week.
Rallies in European shares have paused on signs the economic
recovery is stuttering. Elections to the European Parliament in
coming days are being watched closely for any impact on reforms in
"We have seen since last Thursday some corrective action in
(low-rated euro zone bond) markets ahead of the EU elections. This
can go further," said Matthias van der Jeugt, a fixed income
strategist at KBC.
The fall in European shares followed a 0.2 percent drop in Tokyo and
a broad selloff on Wall Street, in which Caterpillar dropped 3.6
percent after the heavy machinery company said "retail statistics"
for the three months to April were down 13 percent.
Tuesday's fall took losses in U.S. stocks to more than 1 percent
since the Dow and the S&P 500 hit record closing highs on May 13 as
investors seek confirmation the U.S. economy is accelerating.
The BOJ kept monetary policy steady, as expected, and signaled its
aggressive stimulus was helping broaden the economic recovery.
Governor Haruhiko Kuroda was optimistic Japan was on course to meet
the bank's inflation target.
Later on Wednesday, Federal Reserve chair Janet Yellen speaks in New
York and the U.S. central bank will release the minutes of its
latest policy meeting. Most market participants do not expect any
solid clues on when interest rates may rise.
Benchmark U.S. 10-year Treasury yields dipped in Europe to 2.51
percent, close to half-year lows. Comments from a senior Fed
official that the central bank would be "relatively slow" in raising
interest rates saw the dollar fall to a 3-1/2 month low against the
"Kuroda's comments are lowering expectations of further BOJ stimulus
and there is position squaring going on which is driving dollar/yen
lower," said Manuel Oliveri FX strategist at Credit Agricole.
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"At the same time one has to be cautious about the FOMC minutes with
Yellen also due to speak later in the day."
The drop in U.S. yields also helped the euro, which rose 0.15
percent to $1.3717, pulling away from a 2-1/2 month low of $1.3648
hit last week on expectations the European Central Bank will ease
monetary policy in June.
German Bund futures rose and cash 10-year yields edged lower, while
yields on 10-year Spanish and Italian bonds each rose 9 basis points
to 3.17 percent and 3.33 percent respectively.
Weaker shares burnished gold's appeal as a hedge and the metal held
steady below $1,300 an ounce.
Brent crude oil futures edged up towards $110 a barrel as U.S. crude
inventories fell and on renewed violence in OPEC producer Libya.
(Additional reporting by Lisa Twaronite in Tokyo, Alistar Smout in
Edinburgh, Emelia Sithole-Matarise and Anirban Nag in London;
Editing by John Stonestreet)
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