Dow Jones Newswires , 4 April 2017 04:27
European Morning Briefing: Stocks Seen Lower; Risk Aversion Returns
Stocks seen lower; EUR/USD 1.0667-70; German 10-Year bund yield 0.278%; Brent crude $53.15; gold $1257.00
-BOJ Gov. Kuroda: Premature to Discuss Exit From ETF Purchase Program
-Harker Sees Balance Sheet Reduction Possibly Later This Year
-Mylan Hit With Lawsuit Alleging It Overcharged EpiPen Patients
-BMW Workers Vote to Strike Over Planned Pension Changes
Watch For: EU retail trade; U.K. construction PMI; ECB's Draghi and Liikanen speak; earnings from
Bank of Japan Gov. Haruhiko Kuroda said it is premature to discuss how the central bank might end its exchange-traded fund purchases, suggesting that a reduction isn't on the table yet.
"I think it is premature for us to discuss strategies that we may employ to exit from the current easing policy, including the purchases of ETFs," Mr. Kuroda said in parliament on Tuesday. The ETF purchases are necessary to generate the 2% inflation being targeted by the central bank, he added.
Mr. Kuroda's latest remarks could pour cold water on speculation that the BOJ might move in the coming months to slow its ETF purchases from the current annual pace of six trillion yen ($54.3 billion). As of March 20, the central bank had about Y12.7 trillion in ETFs.
Federal Reserve Bank of Philadelphia President Patrick Harker said Monday in an interview with reporters he favors reducing the central bank's $4.5 trillion balance sheet in a way that minimizes market disruptions, possibly starting sometime later this year.
The Fed is widely expected to communicate a strategy in the coming months for managing down the giant portfolio of Treasury and mortgage bonds it amassed during the financial crisis, with the aim of stimulating growth. But, despite early stage discussions of how to go about this at its last policy meeting in mid-March, until recently Fed officials have been largely noncommittal on how fast and how soon they want to get started, and their end goal.
"We're still working on a plan," Mr. Harker said in the interview following a speech at the University of Pennsylvania on financial technology innovations. "We don't want to do anything that creates significant distortion in markets." But he said "possibly by the end of this year, or beginning of next year, would be an appropriate time," depending on how economic data progress.
IG futures suggest the DAX will open down 8 points, the CAC 40 down 4 points and the FTSE 100 up 5 points.
Asian equities pulled back Tuesday as investors turned risk averse again amid growing investor uncertainty about U.S.-China trade and monetary policy in Japan and Europe.
The yen rose against the dollar through the U.S. session, and has continued to strengthen in Asian trade.
The rising Japanese currency and declines in U.S. Treasury yields put the Nikkei Stock Average down 0.4%. Financials and exporters dropped on Tuesday, sending the index to an eight-week low.
Other declines in Asia have been more modest, with Korea's Kospi and Australia's S&P/ASX 200 both off 0.1%. China, Taiwan and Hong Kong markets were closed for a holiday.
While market participants continue to focus on a coming meeting between Mr. Trump and Chinese President Xi Jinping later this week, there is growing uncertainty regarding monetary policy in Japan and Europe, said Gavin Parry, managing director of Hong Kong-based Parry International Trading. "The undercurrent focus is central banks."
U.S. stocks kicked off the second quarter with declines.
The S&P 500 fell 0.2% after posting its biggest quarterly gain since 2015 on Friday. The Dow Jones Industrial Average shed 13 points, or 0.1%, to 20650 and the Nasdaq Composite fell 0.3%.
Shares of financial companies were among Monday's biggest decliners, with the KBW Nasdaq Bank Index of large U.S. commercial lenders shedding 0.2%.
A gauge of U.S. factory-sector health moderated slightly in March, data showed Monday, with the Institute for Supply Management saying its manufacturing PMI for last month was 57.2, down from 57.7 in February.
Markets are "trying to adjust for the prospects of politics in Washington. That's the major turbulence right now," said Brad McMillan, chief investment officer at Commonwealth Financial Network.
Mylan was hit Monday with a lawsuit alleging the drug company overcharged EpiPen patients as part of an illegal scheme to secure sales.
The lawsuit, which is seeking class-action status, is the latest fallout from patient anger over the cost of EpiPens, the lifesaving allergy treatments whose price Mylan has raised nearly 550% to $609 for a two-pack since it acquired EpiPen rights in 2007.
A Mylan spokeswoman declined to comment.
BMW, the German auto maker, is facing strikes at its four English sites over planned changes to its defined-benefit pension plans.
Workers voted to back strike actions at plants in Oxfordshire, Chichester, Birmingham and Swindon, the Unite union said Friday. It hasn't yet stated a date.
BMW has proposed closing two defined-benefit pension plans for further accrual effective June 2017.
The yen strengthened against the U.S. dollar and euro, following pressure overnight from a deadly blast in Russia, weak U.S. manufacturing data and investor worries about events later in the week.
The WSJ Dollar Index was 0.4% lower at 90.31.
U.S. President Donald Trump will meet with Chinese President Xi Jinping later this week and the U.S. jobs report is due Friday. Amid a lack of fresh trading cues during Asia trade Tuesday, "investors feel they can't sell the dollar ahead of [the U.S.] jobs data," said Mizuho Securities chief foreign-exchange strategist Kengo Suzuki.
The lack of market-moving news also contributed to investors' risk-off mood. Investors piled into the yen even though the Federal Reserve appears to be on track to keep tightening this year, said Masahi Murata, currency strategist at Brown Brothers Harriman in Tokyo.
"There's nothing else on the plate to move things along. What is there is not enough to support the dollar-yen," Mr. Murata said.
At 0250 GMT, EUR/USD was flat at 1.0667-70, USD/JPY was lower at 110.63-64 and GBP/USD was flat at 1.2491-93.
A deadly explosion in Russia stoked demand for haven assets, sending the yields on both the 10-year U.S. Treasury note and the 10-year German bund to the lowest level in more than a month.
Another boost for bonds: A disappointing manufacturing release in the U.S. raised some question over the economic growth momentum. Traders said the report gave some investors a fresh impetus to dial back the Trump trades.
The yield on the benchmark 10-year Treasury note was 2.351% Monday, compared with 2.396% Friday. It was the yield's lowest close since Feb. 24. The yield on the 10-year German bund fell to 0.280% Monday, the lowest close since the end of February.
The monthly U.S. manufacturing index released Monday from the Institute for Supply Management stood at 57.2 last month, a touch below 57.5 forecast by economists. The stall followed large improvement in recent months. In February, the index climbed to its highest level since August 2014.
Crude-oil futures bobbed in a narrow range in Asia trading following declines in the U.S. session amid renewed concerns of oversupply after Libya resumed operations at its biggest oil field.
After last week's stellar performance, oil kicked off this week with a shaky start as Libya announced the production resumption at the Sharara field. Prior to last week's shutdown, output there was 220,000 barrels a day.
Libya's production, modest compared to the daily reduction of 1.8 million barrels of oil under the deal by Organization of the Petroleum Exporting Countries and other heavyweight producers such as Russia, could still stands to frustrate OPEC's effort to drain the glut of oil, said analysts at fuel-oil broker Tradition.
Meanwhile, "the concern about rising output outweighed the perception of tightening markets," said ANZ Research.
Nymex May oil was up 4 cents at $50.28 per barrel while June Brent added 3 cents to $53.15.
Gold was trading higher at $1,257.00 per troy ounce.
(MORE TO FOLLOW) Dow Jones Newswires
April 03, 2017 23:27 ET (03:27 GMT)
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Dow Jones Newswires , 4 April 2017 04:27
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The Eurozone is anything but booming. Latest figures show that wages are flat. Credit to the private sector is flat. Households are still desperately trying to reduce their debts. In other words, the real economy is stagnant. What does give the impression that something is happening is that the ECB is still buying bonds from the corporate sector at a rate of 60 billion Euro a month - it was 80 billion a month before March. This massive money printing creates asset inflation, i.e. the wealthy become much more wealthy. They, in turn, can hire a few more immigrants at minimum wage or below to wipe their arses. And that's your employment growth. And to cap it all - the euro is actually falling faster than the Rand is. Let's not forget that even with this downgrade from the S&P, as I write this, the Rand is still up 1.4% over the last six months - while the Euro is down 4.22%.
Domestic credit to the private sector as a % of GDP is a key indicator of economic wellbeing. You will see from this chart from the World Bank that the Eurozone is bottom of the list among the developed world.