European shares up as banks reassure,
dollar holds near highs
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[October 27, 2016]
By Vikram Subhedar
LONDON (Reuters) - Reassuring results from
some of Europe's biggest banks gave financials a boost on Thursday and
helped offset weakness in oil-related stocks, while higher bond yields
underpinned the dollar.
As corporate earnings continued to dominate headlines, growing
expectations that the U.S. Federal Reserve will raise interest rates by
the end of the year have kept gains in risky assets in check.
Markets are now pricing in a 74-percent chance that the U.S. Federal
Reserve will raise interest rates at its December meeting, according to
CME Group's FedWatch tool, following a series of hawkish comments from
Fed policymakers.
Bets that the Fed will hike rates have driven the dollar to nine-month
highs against a basket of currencies <.DXY> this week and have supported
U.S. 10-year Treasury yields <US10YT=RR>.
The "steepening of the US yield curve works as a magnet for capital
coming at this point in particular out of low yielding environments such
as Japan and Switzerland," said analysts at Morgan Stanley, adding that
these flows will continue to support the dollar.
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The dollar index was up 0.1 percent at 98.716, just off its recent
highs.
An overnight slide in oil prices and underwhelming results from Apple
<AAPL.O> soured the mood in Asian stocks where technology sectors led
losses in Japan.
Europe's STOXX 600 <.STOXX> was up 0.3 percent, however, though
defensive sectors such as healthcare and utilities provided the biggest
boost to the index, reflecting investor caution.
Banks <.SX7P>, among the worst performing sectors in Europe this year,
rose 0.5 percent helped by a surprise third-quarter profit at Deutsche
Bank <DBKGn.DE> and forecast-beating numbers from Barclays <BARC.L>
which, like its U.S. rivals, enjoyed a significant pick-up in bond
trading revenue.
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Traders work at their desks in front of the German share price
index, DAX board, at the stock exchange in Frankfurt, Germany,
October 21, 2016. REUTERS/Staff/Remote
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Data from the European Central Bank showing lending growth to euro
zone companies and households grew at a steady pace last month was
also seen helping the sector.
The euro <EUR=> was little changed against the dollar while sterling
<GBP=D4> rose after data showed Britain's economy barely slowed in
the third quarter despite the Brexit vote shock.
UK ten-year government bond yields <GB10YT=RR> rose to a 10-day high
of 1.2 percent as the strong data further diminished the chance of a
fresh interest rate cut by the Bank of England next week.
In commodity markets, crude oil futures rebounded from earlier
losses as traders remained cautious that OPEC would be able to cut
production come late November. [O/R]
U.S. crude <CLc1> edged up 0.4 percent to $49.38 a barrel, while
Brent crude <LCOc1> added 0.7 percent to $50.33.
Spot gold XAU= rose 0.2 percent to $1,269.38 an ounce.
(Reporting by Vikram Subhedar; Editing by Raissa Kasolowsky)
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