Central banks in focus as
oil slump, spiking bond yields dent risk appetite
Send a link to a friend
[July 07, 2017]
By Vikram Subhedar
LONDON (Reuters) - World stocks are poised
to end the week at six-week lows in the face of oil weakness, a spike in
bond yields and anticipation of tighter monetary policy, particularly in
the United States.
U.S. monthly payrolls data is due on Friday and economists polled by
Reuters expect U.S. employers to have added 179,000 jobs in June, above
May's gain of 138,000.
Investors are focused on wage growth and whether spending by U.S.
consumers will be strong enough to back the U.S. Federal Reserve's
intention to further tighten policy.
Bets that the world's major central banks are moving closer to unwinding
ultra-loose monetary policies have roiled markets and European Central
Bank minutes released on Wednesday indicate its policymakers are open to
further steps.
This sent German government bond yields to 18-month highs, lifted the
euro <EUR=> and weighed on stocks.
"Bond yields rule," said strategists at Morgan Stanley, led by Hans
Redeker.
Bond markets are having an increasing impact on FX and equity markets,
the strategists said, drawing parallels with moves seen in 2013 during
the so-called "taper tantrum," when Fed signals about withdrawing
liquidity hit markets.
MSCI's gauge of global stocks was at its lowest since late May's record
highs and down 0.6 percent for the week.
European shares fell 0.3 percent led lower by financials.
Stock futures on Wall Street pointed to a steady open after a tech-led
swoon pulled major U.S. benchmarks sharply lower overnight. [.N]
[to top of second column] |
People walk through the lobby of the London Stock Exchange in
London, Britain August 25, 2015. REUTERS/Suzanne Plunkett/File photo
The dollar rose against a basket of major currencies and hit a seven-week high
against the yen after the Bank of Japan increased its government bond buying,
expanding monetary policy when other central banks are moving towards
tightening.
The BOJ said it would purchase an unlimited amount of bonds, as it sought to put
a lid on domestic interest rates pushed higher by the broad sell-off in
developed market bonds.
In commodity markets, Brent crude futures <LCOc1>, the international benchmark
for oil prices, were trading down 1.2 percent, at $47.55 per barrel.
Oil prices are down more than 16 percent this year, muddying the outlook for
inflation expectations globally.
Weakness in crude prices was drag on UK's bluechips though a slide on sterling
after disappointing economic data helped the exporter-heavy index outperform the
region on the day.
Sterling slipped to the day's lows against the dollar, setting it up for its
weakest weekly performance in a month, after industrial output data unexpectedly
contracted in May, posing fresh challenges for the UK economy.
"Given the soft data this week, I think a U.K. rate hike is increasingly
becoming a 2018 story," said Viraj Patel, an FX strategist at ING in London.
(Additional reporting by Saikat Chatterjee; Editing by Alexander Smith and Hugh
Lawson)
[© 2017 Thomson Reuters. All rights
reserved.] Copyright 2017 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |