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 European stocks bounced 1 percent as the region's bourses opened
after Wednesday's 3.2 percent plunge, but fell back into the red
soon after on concerns about a bond market sell-off in the debt of
peripheral euro zone countries.
In the currency markets, the U.S. dollar <.DXY> started to slip
again after one of its sharpest drops of the year while the
safe-haven Japanese yen <JPY=> and gold <XAU=> both held on to most
of their gains, leaving them near their highest in a month.
"Markets are likely to be picking up the pieces today and trying to
work out where we go from here," said Rabobank strategist Michael
Every.
"In Europe we only have final September CPI, but in the US there are
initial claims, industrial production, the Philly Fed, and the NAHB
housing survey. To say that the market’s patience for
weaker-than-expected reports will be limited is an understatement."
Assets which depend on economic growth, such as shares and oil, have
been hit by a raft of weak indicators from Europe at a time when
other big economies, including China, Japan and Brazil face their
own hardships.
These come as the U.S. Federal Reserve prepares to wind down later
this month the asset purchase program that has boosted markets over
the past two years. Many observers doubt new measures from the
European Central Bank will make up for it.
The borrowing costs of some of the euro zone's most highly indebted
southern states climbed again on Thursday. Markets have also been
rattled by fears the fragile government in Greece, one of the
countries at the center of the region's debt crisis, could fall.
Greek 10-year bond yields edged up 9 bps again to 7.94 on Thursday
after their biggest two-day sell off since October 2008.
One of Greece's euro partners told Reuters late on Wednesday that
Athens was changing its mind about quitting its EU/IMF aid program
next year, while a source said on Thursday the ECB would make it
easier for Greek banks to tap its cheap funding.
Portuguese , Spanish and Italian 10-year yields rose too, edging up
5 bps to 3.36, 2.45 and 2.15 percent respectively and pulling
further away from Germany's benchmark Bunds which hovered at
0.78 percent.
U.S. GLOOM
Wednesday's turmoil had sparked a safe-haven rally in U.S.
Treasuries and pushed the yield on the benchmark 10-year note as low
as 1.865 percent, its lowest since May 2013. It last stood at 2.08
percent in Europe.
Only a month ago, markets were thinking the Federal Reserve could
hike U.S. rates as early as June next year, but after a stormy last
few weeks traders have pushed back their expectations until the
first quarter of 2016.
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Wall Street stocks have been slammed too. The benchmark S&P 500 as
well as MSCI 45-country world index has lost almost 10 percent
in the last three weeks. U.S. stocks are still up 170 percent since
the depths of the financial crisis in 2009 though.
The dollar's index against a basket of six major currencies stood at
84.967, down about 0.2 percent on the day and near levels last
plumbed in September.
"For those who were looking to buy the dollar, this was a very
healthy correction," said Kaneo Ogino, director at Global-info Co in
Tokyo, a foreign exchange research firm.
As European trading gathered pace, however, it was starting to
backslide again and was last at 105.87 yen having been as high as
106.32 in Asia. The euro hovered at $1.2815 after rising as high as
$1.2885 overnight, its highest level since last month.
The dollar's sharp fall overnight lent modest support to battered
oil prices but they were back down at new 4-year lows in London.
Brent crude has lost more than 28 percent since June amid slow
demand and abundant supply, with losses accelerating in recent weeks
on signals that the Organization of the Petroleum Exporting
Countries will not cut output.
It was at $82.97 a barrel at 4.15 a.m. EDT while, U.S. crude fell
over a dollar to $80.58 a barrel. It hit a low at $80.01 on
Wednesday, the weakest since June 2012.
Spot gold was steady at $1,239.60 an ounce, not far from a one-month
high of $1,249.30 on Wednesday while copper added about 0.3
percent to $6,656.25 a metric ton (1.1023 tons) after shedding 2.3
percent the previous session, its biggest daily drop since March.
(Editing by Anna Willard)
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