Global shares rise as Riksbank helps ease Fed wait

[October 28, 2015]  By Marc Jones

LONDON (Reuters) - European stocks rose for the first time in three sessions on Wednesday after Sweden's central bank increased its bond-buying but other assets were steady as investors wait to see if the Federal Reserve will clarify its rate hike plans later.

The Riksbank's decision to ramp up its asset purchases by another $7.6 billion was a first reaction to the ECB's recent signal that it will expand or extend its quantitative easing program in December.

Seeking to head off a sharp rise in the crown, the central bank also suggested it could keep Swedish interest rates negative for longer than originally envisioned.

That sent Sweden's 10-year government bond yields to two-month lows and pushed Stockholm's stock market  towards a two-month high. The crown also briefly hit a two-month low against the euro before a spritely rebound.

"They (Riksbank) increased QE and that was in reaction to the ECB's signal on (increasing) QE," said Manuel Oliveri an FX Strategist at Crédit Agricole.

"They are constantly reacting to the ECB and the rising expectations of more ECB easing is putting pressure on others too."
 

Corporate results also helped push European stocks higher, with brewing giant Heineken  topping the FTSEurofirst 300 leaderboard with a near 4 percent rise after reporting strong sales.

Volkswagen jumped 3.5 after its results came in better than feared following its recent emissions test cheating scandal.

Attention was otherwise firmly focused on what signal the U.S. Fed will send later when it concludes a two-day meeting.

Markets currently only see around a 30 percent chance it will raise rates this year and economists at Barclays said they expected only minor changes from last month, when the Fed flagged uncertainty about inflation and the global outlook.

The dollar was biding its time ahead of the Fed's statement at 1800 GMT. The dollar basket was close to a 2-1/2-month high at 96.865 as the ECB's easing hints kept the euro pinned at $1.1043 and the yen barely budged at 120.35 yen to the dollar.

ECB chief economist Peter Praet repeated that there were "no taboos" in terms of the measures it could take.

Oil underscored the problems central banks face in lifting ultra-low global inflation, with both Brent and U.S. crude notching more than one-month lows before bouncing back to $47.20 and $43.57 respectively as European trading gathered momentum.

For Norway, one of Europe's main oil producers, there was more gloom as its $863 billion sovereign wealth fund registered its second quarterly loss in a row. It owns a large chunk of Volkswagen shares so the carmarker's recent woes put a sizeable dent in its performance.

APPLE JUICE

Asia trading had had a cautious feel overnight.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.9 percent as Shanghai stocks lost 1.7 percent, Hong Kong's Hang Seng fell 0.8 percent and Indonesia's dropped 1.4 percent.

Tokyo's Nikkei bucked the trend and rose 0.6 percent on bargain hunting following the previous day's fall.

Finance and insurance stocks had again weighed on Chinese indexes, as investors continued to digest weak bank earnings and deposit rate liberalization, while U.S.-China tensions rumbled on over naval patrols in the South China Sea.

Results from Apple late on Tuesday provided talking points too. Hefty sales of new iPhones allowed it to record the biggest corporate profit ever though a slowdown of overall sales in China tempered the optimism.

The Australian dollar dropped to a three-week low after soft inflation data paved the way for a further interest rate cut, possibly as soon as the central bank's Nov. 3 policy meeting.
 

It struggled near $0.7112, having lost about 1 percent on the day. Commodity currencies like the Canadian dollar were also hit by the overnight slide in oil prices. It steadied at C$1.3275 after a 0.9 percent pop up.

MSCI's benchmark emerging market index  fell for a third straight day, though there was some welcome respite for Russia's rouble after a run of heavy falls.

(Editing by Catherine Evans)

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