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 Safe-haven gold XAU= was stuck near a four-month low while there
were also signs pressure was building again on emerging market
assets that suffered badly earlier in the year from rising U.S.
rates. EMRG/FRX
Investors were already beginning to move to the sidelines before
Thursday's ECB meeting, where expectations are intense that the bank
will respond to the euro zone's low inflation and sluggish growth
with an aggressive set of easing measures.
The euro sagged 0.1 percent to about $1.3611 EUR= in early trading,
while shares steadied and the region's main bond markets clawed back
some of the ground they had conceded on Tuesday following the rise
in U.S. rates. GVD/EUR
"What is interesting across the market is that U.S. rates are
higher," said John Hardy, head of FX strategy for Saxo bank in
Copenhagen. "We've seen the 10 year Treasury yield zip back above
the 2.5 percent level and it has been quite a significant move these
last few days."
"Emerging market currencies backing up again and it is also pushing
dollar/yen higher so there is a very interesting-sub plot developing
outside of the ECB."
There has been a near 20 basis points rise in 10-year U.S. Treasury
yields US10YT=RR since the end of last week. Treasuries tend to be a
benchmark for global borrowing costs so movements tend to be felt in
virtually all parts financial markets.
In Asian trading, shares on Tokyo's Nikkei had hit a fresh 2-month
high on a weaker yen JPY= and pension reforms, though action
elsewhere in the region was muted.
European shares dipped in opening trading, though they had mostly
recovered by 0800 GMT (4 a.m. EDT), with the main markets in London
.FTSE, Frankfurt .GDAXI and Paris .FCHI virtually unchanged. .EU
"With no one in a rush to do anything, markets are still hovering
near their recent highs but with no one willing to bet big ahead of
the central bank meetings and payrolls, the natural position
squaring is leading to a consolidation," Jonathan Sudaria, a dealer
at London Capital Group, said in a note to clients.
U.S. JOBS DATA ON FRIDAY SEEN AS TEST
On Wall Street overnight, shares edged lower but remained close to
multi-year highs, with the benchmark S&P 500 .SPX ending less than a
point off Monday's record close, and helping to push benchmark U.S.
bond yields to three-week highs.
In early European trading, the yield on 10-year notes was at 2.575
percent, slightly down from its U.S. close but well above last
week's 11-month lows. German Bunds DE10YT=TWEB were at 1.354
percent. GVD/EUR
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U.S. economic data on Tuesday showed new orders for factory goods
rose for a third straight month in April and automakers recorded
solid vehicle sales in May, adding more evidence to support market
expectations of an improved second quarter performance.
U.S. jobs data on Friday could help determine whether the rise in
yields will continue. The U.S. nonfarm payrolls report for May is
expected to show that employers added 218,000 jobs, according to the
median estimate of 105 economists polled by Reuters.
The dollar index, which tracks the greenback against a basket of six
major rivals, added about 0.1 percent on the day to 80.653 .DXY, not
far from Monday's high of 80.681, which was its best level since
mid-February.
It put the squeeze on emerging markets. The Indonesian rupiah led a
wave of Asian currencies down as it hit a near four-month low, while
further south, the Australian dollar AUD=D4 leapt a quarter of a
U.S. cent after it first quarter growth figures beat forecasts.
In commodities trading, gold XAU= was steady at $1,245.90 an ounce
after plumbing a four-month low of $1,240.61 on Tuesday. Oil CLc1
added about 0.2 percent to $102.83 a barrel, after industry data
showed a bigger-than-expected fall in U.S. crude stockpiles.
"I think prices will stabilize here for a short while around $1,245
before making another big jump either way," said a gold trader in
Hong Kong. "People are mostly waiting for Friday's payrolls data
before taking any big positions."
(Additional reporting by Lisa Twaronite in Tokyo, Editing by Angus
MacSwan)
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