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 The past week, described by one strategist as a "game-changer", saw
the dollar climb to 12-year highs versus the euro as central bank
policies diverged in the euro zone and the United States -- the
former battling to compress yields further, the latter paving the
way for a rate hike.
Emerging markets have felt the squeeze from the rising dollar,
however. Russia was the latest country to cut interest rates on
Friday, to 14 percent, putting concerns about the slumping economy
before worries about high inflation and continuing an easing cycle
that began in January.
Emerging-market equities are heading for a second week of losses as
the stronger dollar and expectations of a U.S. rate hike keep up
pressure. Weaker energy prices, with Brent crude hovering at around
$57 per barrel, have also hit investor confidence in oil-producing
markets.
"I don't think its an exaggeration to say this week has been a
game-changer," said Neil Mellor, a currency strategist with Bank of
New York Mellon in London, pointing to recent forecast-beating jobs
data out of the U.S. and the start this week of the ECB's
quantitative easing bond-buying program. "The combination of last
Friday's (U.S.) jobs numbers and the launch of QE in Europe this
week has cemented the picture of monetary policy divergence."
The MSCI All-Country World equity index was down 0.1 percent at
420.40 points. Emerging-markets stocks fell 0.6 percent and
the FTSEurofirst 300 pan-European index 0.1 percent.
The Athens ATG share index <.ATG> was down 1.2 percent after
European Commission President Jean-Claude Juncker said progress on a
deal between Athens and its creditors had been insufficient and said
he would make "proposals" to overcome the differences.
Brent crude fell to $56.61 per barrel. Oil prices might have
stabilized only temporarily because the global oil glut is worsening
and U.S. production shows no sign of slowing, the International
Energy Agency said.
Against a basket of six major currencies, the dollar was slightly
higher at 99.54 and still close to its highest trading levels since
2003.
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The dollar dipped after disappointing U.S. retail sales data for
February, a month marked by harsh weather. That tempered the outlook
for first-quarter growth and created some doubt that the Federal
Reserve will raise as early as June.
However, many investors still expect rates to rise, after last
week's stronger-than-expected U.S. payrolls report. The Fed's
policy-setting committee meets on March 17 and 18, and investors
hope the meeting will yield further clues about the timing of an
increase.
Asian shares put in a mixed performance across the region on Friday
but were underpinned by gains on Wall Street. Japan's Nikkei stock
average <.N225> rose 1.4 percent to a 15-year closing high, marking
its fifth straight winning week.
"There has been more money going into Japan -- that has been a
consistent theme for the last three weeks," said Sean Darby, global
equity strategist at Jefferies. The yen's weakness against the
dollar, as well as companies returning cash via dividends and share
buybacks, are supporting the stock market.
(Reporting by Lionel Laurent; Additional reporting by Patrick
Graham, Emelia Sithole-Matarise and Chris Vellacott; Editing by Toby
Chopra)
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