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 Share markets in Europe saw small gains as Britain and France
debated joining U.S.-led military action against Islamist militants
and as the euro sank to a 22-month low on bets the ECB is heading
for a mass money-printing drive.
Its President Mario Draghi reiterated in a newspaper interview on
Thursday there was more the ECB can do if necessary, having already
promised to keep record low interest rates in place for potentially
years.
His words came as the central bank released its latest batch of
lending data, which showed, as it has for months, that there is
little in the way of demand for credit in the euro zone's
still-struggling economy.
"ECB President Mario Draghi continues to beat the QE (quantitative
easing) drums ... so it's hardly surprising that euro/dollar is
trading at even lower levels this morning," said Esther Reichelt, a
currency strategist at Commerzbank,"
Britain's FTSE dipped but Germany's DAX and France's CAC rose
0.2-0.3 percent to put the region in the black after a choppy few
days.
The currency market was where most of the action was, however, with
the euro falling below $1.27 for the first time since November 2012
as the ECB data cast a shadow.
The dollar, which had its own momentum following some strong U.S.
housing data on Wednesday, powered up 0.35 percent to a fresh
four-year high against a basket of currencies.
A key factor was widening yield differentials between U.S. 10-year
government bonds and their German counterparts. The difference is
now the biggest in nearly 15 years and is driving more investors to
buy the dollar.
The greenback was also within touching distance of its recent
six-year high against the yen and was exerting broad downward
pressure on commodities markets which are largely priced in dollars.
Brent crude was stuck below $97 a barrel having hit its lowest in 26
months, with abundant supply also continuing to drag on prices.
Gold extended its recent losses too, reacting to stronger equities
and the robust U.S. economic data that curbed its safe-haven appeal.
RUSSIA REBOUND
Wall Street was expected start the day little changed according to
futures prices with traders gearing up for a heavy round of
employment and PMI data and another day of deciphering the Federal
Reserve's signals.
Geopolitical uncertainty rumbled in the background as air strikes
against Islamic State militants in Syria continued, but there were
more positive signs on the tensions with Russia over Ukraine.
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Ukraine's President Petro Poroshenko said that for the first time in
many months no deaths or wounded had been reported in the past 24
hours in the conflict with pro-Russian separatists indication the
ceasefire "has finally begun working".
That helped Russian stocks rise for the third day running, with
investors also sensing the European Union may decide to ease some of
its sanctions against Russia by the end of the month.
The Asian day was mixed. MSCI's index of Asia-Pacific shares outside
Japan fell 0.4 percent after touching a four-month low, though
Tokyo's high-flying Nikkei jumped 1.1 percent as the yen continued
to bow to the dollar.
Emerging markets, particularly in Asia and Latin America, continued
to feel the strain of the stronger dollar. EM shares saw their 14th
fall in 16 sessions.
The New Zealand dollar meanwhile hit a one-year low after Reserve
Bank of New Zealand Governor Graeme Wheeler ramped up his recent
warnings about the level of the currency.
"The Bank's analysis indicates that the real exchange rate is well
above its sustainable level, and also above levels justified by
short-term business cycle factors," he said in a statement that
caught markets off-guard.
It also inflicted some collateral damage on its Antipodean cousin,
the Australian dollar, which fell to $0.8813, its lowest since early
February.
"The statement itself was another intervention threat. The Reserve
Bank is saying that even down at these levels the kiwi is too high,"
said Imre Speizer, currency strategist at Westpac.
(Additional reporting by Anirban Nag in London; Editing by Catherine
Evans)
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