Global stocks rise despite G7 clash; Italy helps euro

European stocks edged higher on Monday, shrugging off the weekend’s fractious G7 meeting as investors looked forward to an event-packed week while receding tensions in Italy nudged the euro towards a recent three-week high.

President Donald Trump’s rejection of a previously signed communique separates the United States from its traditional global economic allies and underlines trade tensions, though markets have taken the news as yet another theatrical gesture by the U.S. administration.

If anything, markets believe the G7 summit might force policymakers to adopt a cautious stance as two of the world’s top central banks - the U.S. Federal Reserve and the European Central Bank - are set to tighten policy this week.

While stocks wobbled and the dollar edged higher in initial reaction to the G7, which Societe Generale termed as a “mess”, markets quickly recouped losses, with stocks firmer across the board on expectations that any withdrawal in policy stimulus would be very gradual on the backdrop of rising trade tensions.

An MSCI index of European stocks was up 0.7 percent in early trading, not far from a recent two-week high.

The S&P 500 futures were 0.1 percent lower after dropping as much as 0.3 percent in early trading, indicating a firm start for Wall Street.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped early but was last up 0.3 percent. Hong Kong’s Hang Seng also gained 0.3 percent while the Shanghai Composite Index fell 0.5 percent.

The Fed is almost certain to raise rates again on Wednesday, inching closer to a neutral policy stance, while the ECB is likely to signal on Thursday that its 2.55 trillion euro bond purchase scheme will end this year, a key move in dismantling crisis-era stimulus.

Euro Gains, stocks fall following the Asian counterparts

European Stock Markets

Shares in Europe followed Asian counterparts lower as storm clouds gathered from Turkey to North Korea and data cast doubts on economic growth prospects for the euro area. Treasuries advanced with the dollar, while oil dropped with most commodities.

The Stoxx Europe 600 Index sank by the most in two months alongside U.S. equity-index futures, as optimism over U.S.-China trade talks faded together with prospects for President Donald Trump’s summit with North Korea’s leader.

Concerns over Turkey’s financial-market stability drove the lira to successive record lows and weighed on emerging-market assets. The yen and core European bonds gained with gold as traders sought havens after equity benchmarks from Hong Kong to Sydney declined.

The euro fell to a six-month trough as manufacturing data added to concern economic momentum is slowing, while the pound weakened and gilts climbed as U.K. inflation undershot expectations, denting prospects for rate increases.

Gloom is returning to global markets just as trade tensions between the U.S. and China appeared to be easing. U.S. stocks closed down Tuesday after Trump introduced uncertainty on a meeting with Kim Jong Un, while in Italy questions are swirling around the suitability of the nominated prime minister.

Monetary policy may provide a welcome distraction when the Federal Reserve releases minutes of its latest policy meeting on Wednesday.

Stocks
The Stoxx Europe 600 Index sank 1 percent as of 10:15 a.m. London time, the lowest in more than a week on the biggest tumble in two months.
The U.K.’s FTSE 100 Index sank 0.7 percent.
Germany’s DAX Index sank 1.5 percent.

Currencies
The euro fell 0.4 percent to $1.1735, the weakest in six months.
The British pound sank 0.5 percent to $1.3364, the weakest in five months.

Bonds
The yield on 10-year Treasuries decreased four basis points to 3.02 percent, the lowest in more than a week.
Germany’s 10-year yield dipped five basis points to 0.51 percent, the lowest in five weeks.
Britain’s 10-year yield decreased seven basis points to 1.523 percent, the largest tumble in two months.

Commodities
West Texas Intermediate crude decreased 0.5 percent to $71.85 a barrel, the biggest dip in more than a week.
Gold jumped 0.2 percent to $1,294.20 an ounce.
LME copper sank 2.1 percent to $6,831.00 per metric ton, the lowest in a week on the biggest tumble in almost four weeks.

European shares climbs to highest since February as Italy recovers

European Stock Markets

European shares touched their highest level since the start of February on Tuesday as autos and bank stocks climbed, and Italian shares recovered as the anti-establishment coalition’s government formation process stalled. 

The pan-European STOXX 600 rose 0.2 percent, extending Monday's gains as carmakers rose on a cut to Chinese tariffs. Italy's FTSE MIB .FTMIB gained 0.7 percent.

Volkswagen (VOWG_p.DE), BMW (BMWG.DE) and Daimler (DAIGn.DE) were among the biggest boosts to the STOXX, up 1 to 1.6 percent, after China said it would cut the import duty on passenger cars and auto parts from July 1.

Europe’s autos sector .SXAP climbed 0.7 percent and Italy’s Fiat Chrysler (FCHA.MI) also rose 1.3 percent, helping the Italian index gain 0.6 percent.

Italian bank stocks .FTIT8300 recovered as the anti-establishment 5Star and League parties’ government plans stalled. President Sergio Mattarella sought further consultations over their proposed prime minister, a political novice. [nL5N1SS1DE]

Some investors were doubtful a coalition government would be able to go ahead with their big spending plans that have spooked markets, sending Italian bond yields to their highest in more than a year.

Competitive pressures, and hopes of dealmaking, triggered strong single-stock and sector-wide moves.

Inmarsat (ISA.L) shares dropped 8.4 percent to the bottom of the STOXX after the International Maritime Organisation authorised competitor Iridium (IRDM.O) to provide maritime safety systems, threatening Inmarsat’s monopoly in maritime distress communications.

French telecoms stocks Bouygues (BOUY.PA), Orange (ORAN.PA) and Iliad (ILD.PA) all rose after the head of the country’s telecoms regulator reignited talk of possible mergers in the sector, in comments to Le Monde newspaper.

Altice (ATCA.AS) shares also rose on investors’ hopes for M&A, and as the stock readjusted to the separation of Altice USA from Altice NV. The telecoms sector rose 0.8 percent overall.

Banks HSBC (HSBA.L), Santander (SAN.MC), BNP Paribas (BNPP.PA) and UBS (UBSG.S) were also among top drivers, benefiting from the recent rise in bond yields.

Swiss industrial machinery firm Georg Fischer (FIN.S) jumped 7.7 percent after UBS upgraded the stock to a “buy”, saying the market is underestimating the company’s margins and earnings potential, helped by its diversification in different industrial products.

Overall Europe’s earnings performance has been relatively disappointing, particularly compared with a stellar quarter in the U.S.. Bank of America Merrill Lynch said the ratio of STOXX 600 companies beating earnings targets this quarter was the worst since 2013.

Euro slides down to fifth successive weekly decline with political uncertainity in Italy

European Stock Markets

The euro was headed on Friday for its fifth successive weekly decline versus the dollar, in what would be a first for the currency since 2015, as political uncertainty in Italy continued to worry investors

The euro has slumped six cents from more than $1.24 in the space of three weeks after a huge dollar rally and amid concerns about the demands of populist parties likely to form Italy’s next government.
On Thursday, the far-right League and 5-Star Movement agreed the basis for a governing accord that would slash taxes and ramp up welfare spending.

Ratings agency DBRS warned that the economic proposals of the anti-establishment parties could threaten Italy’s sovereign credit rating.

The euro on Friday inched up 0.2 percent to $1.1814. But the currency has fallen nearly 1.2 percent this week and on Wednesday dropped to a five-month low of $1.1763.

A founding member of the EU and the euro, Italy accounts for 15.4 percent of Eurozone GDP and the parties’ hostility toward the European Union stance is the biggest challenge to the bloc since Britain voted to leave two years ago.

Still, some investors have played down the broader impact on the euro and questioned whether the Italian parties will really follow through on such plans.

A powerful rally by the dollar is also hurting the euro.

On Friday the greenback edged higher against the yen and set a fresh four-month high, buoyed by a further rise in U.S. Treasury yields that suggests a an upbeat outlook for the world’s largest economy.
The dollar, which has risen 5 percent since mid-February, touched a high of 111.005 yen on Friday, its strongest level since Jan. 23.


Investors are betting that U.S. interest rates will need to rise further to curb inflation.

That has forced investors who took big positions against the dollar anticipating it would fall in 2018 to rush to unwind and cover their positions, pushing the greenback even higher.

In a note to clients, strategists at Citibank said the current rally in the dollar would not last long.
The U.S. budget deficit, which is projected to balloon to more than $1 trillion in 2019, they said, would contribute to a drop of 5 percent in the dollar index over the next 12 months.

Most emerging market currencies continued to wilt against the surging dollar.

The Indonesian rupiah weakened half a percent to 14,115, its lowest in more than 2-1/2 years and shrugging off a rate rise by the central bank late on Thursday.

European stocks set to win longest weekly winning streak in 3 years

European Stock Markets

European stocks were set to achieve their longest weekly winning streak for more than three years on Friday as M&A activity added to an advance on the back of a busy earnings season.

Shares traded in a narrow range, with the pan-European STOXX 600 index down 0.1 percent by 1010 GMT, still on course for its seventh straight week of gains and the longest winning streak since March 2015. Germany's DAX .GDAXI fell 0.4 percent while Britain's FTSE 100 .FTSE was flat in percentage terms.

Though moves at the index level were muted, shares in Sika (SIK.S) soared 8.7 percent to the top of the STOXX after the Swiss chemicals company reached an agreement with French building materials firm Saint-Gobain (SGOB.PA) to end a long-standing legal dispute.

Saint-Gobain, whose shares rose 2.8 percent, is to take a large stake in Sika, but not majority control.

Shares in Daily Mail and General Trust (DMGT) (DMGOa.L) rose 2.3 percent, having jumped as much as 9.4 percent, after U.S.-based private equity firm Silver Lake Management Company agreed to buy ZPG (ZPG.L), the owner of British property websites Zoopla and PrimeLocation, for 2.2 billion pounds.

DMGT is the biggest shareholder in ZPG, whose shares rocketed about 30 percent to a record high. Shares in fellow British classifieds websites Rightmove (RMV.L) rose 6.5 percent and Auto Trader (AUTOA.L) rallied 4.1 percent.

While the first quarter earnings season was winding down in Europe, basic resources .SXPP was the best-performing sector after shares in ArcelorMittal (MT.AS) rose 2.2 percent. The world’s biggest steelmaker beat earnings forecasts and gave an upbeat outlook for 2018.

So far blended year-on-year earnings growth for the first quarter has come in at 16 percent for MSCI EMU, in dollar terms, compared with 26 percent for the S&P 500, according to Thomson Reuters I/B/E/S.

Outside of the STOXX, earnings updates boosted shares in Italian banks. Monte dei Paschi (BMPS.MI) jumped 11 percent after the bank swung to a profit in the first quarter thanks to lower costs and loan losses, while UBI Banca (UBI.MI) gained 1.2 percent after its results.

While the Italian banking sector .FTIT8300 has been under pressure recently on the back of political jitters, the sector is up more than 13 percent this year while Italy's benchmark FTSE MIB .FTMIB has risen 10 percent.

Sterling headed for fourth successive weekly decline after BoE holds rates

European Stock Markets

Sterling on Friday headed for its fourth successive weekly decline versus the dollar, in what would be a first for the currency since 2015, after the Bank of England held rates and cut its economic growth projections. 

The pound fell sharply after the BoE on Thursday held interest rates steady as expected but cut its growth and inflation projections for this year and next.

The decision bred scepticism among investors over whether the central bank would hike rates at all this year after weeks of declines caused by weaker-than-expected economic data that was partly blamed on bad weather.

Sterling has tumbled to $1.35 in recent weeks from its post-Brexit vote highs of close to $1.44 and erased its gains against the dollar for the year.

The pound recovered somewhat on Thursday after Bank of England Governor Mark Carney told the BBC that he expected a rate rise over the course of the next year if there were no shocks to the economy.

On Friday the currency rose 0.1 percent versus the dollar at $1.3533 and increased 0.1 percent against the euro at 88.090 pence.

Some analysts criticised Mark Carney for the decision to hold rates and for a month earlier making comments that the market perceived as a signal for a near-certain May rate hike.

Carney told reporters on Thursday the bank’s earlier guidance on tighter policy had been conditioned on February inflation projections but the economy had not fulfilled those conditions.

But other analysts said that doubts over the BoE’s message would fade, especially if data in the next months showed the British economy gaining momentum.

Europe Stock Market News

Eurozone inflation may signal ECB's future moves better than its President Mario Draghi could: Last week, the ECB reiterated its commitment to backing out of its extremely accommodative monetary policy stance gradually, while further delaying an announcement on timing of any rate moves that traders had eagerly anticipated. 

From the central bank's perspective, that was the most significant move it could make without stoking fear that its confidence in the economy and/or financial system was flagging. Yet, this group finds itself in a difficult situation where it's falling behind the curve as the Fed continues to tighten and its own easing is yielding smaller and smaller results.

Where Draghi and his colleagues have to walk a fine line, data can be more blunt. This past session, the Eurozone first-quarter GDP growth slowed in-line with expectations. More important will be the region's inflation pace.

Earlier this week, German, Italian and Portuguese consumer price indices all weakened. Between the Eurozone's inflation and the European Commission's updated growth forecasts, we will have the full picture for ECB decision making.

Markets Update:

SPI futures up 4 points, or 0.07%, at 6050 as of 7am AEST.

AUD/USD fell 0.2% to 74.91 US cents

On Wall Street: Dow Jones -0.7%, S&P 500 -0.7%, Nasdaq -0.4%.

In New York: BHP up 1.4%, Rio u[ 0.8%.

In Europe: Stoxx 50 +0.5%, FTSE 100 +0.3%, CAC 40 +0.2%, DAX +1.5%.

Spot gold down 0.1% to US$1304.73 an ounce.

Brent crude flat at US$73.11 a barrel.

US crude oil up 0.7% at US$67.73 a barrel.

Dalian iron ore up 2.35% at CNY479.50 a tonne.

LME aluminium up 2.7% at US$2322 a tonne.

LME copper up 1.1% to US$6820 a tonne.

10-Year Bond Yield: US 2.97%, Germany 0.58%, Australia 2.8%.

Easing Middle East anxiety helps stocks recover

European Stock Markets

European shares began to recover on Thursday as Wall Street futures pointed to a positive U.S. open, with investors’ anxiety over a threatened clash between Western powers and Russia in Syria easing ahead of a strong U.S. earnings season. 

The ratcheting up of geopolitical tensions over an alleged chemical attack by Syrian government forces kept bond yields low, while crude prices eased back, having surged to 2014 highs as a result of political risk in the oil-rich region.

MSCI’s world equity index .MIWD00000PUS fell for the second day, while European shares managed a 0.3 percent gain..

Attention in Europe turned to the minutes of the March European Central Bank meeting expected at 1130 GMT. Investors hoped for greater clarity on the bank’s timing for the unwinding of quantitative easing.

Losses among European stocks were limited by strong oil and gas shares .SXEP, boosted by this week’s jump in crude prices, and sentiment also improved ahead of Wall Street’s open with futures up 0.4 to 0.5 percent. 1YMc1 ESc1 NQc1

Investors were anticipating very strong results from U.S. corporates in the upcoming quarterly earnings season, keeping them from turning overly bearish on stocks despite political risks.

U.S. President Trump amended on Thursday his earlier warning of a swift military strike on Syria, writing on Twitter “it could be very soon or not so soon at all”, sending the dollar .DXY higher.

Trump had declared on Wednesday that missiles “will be coming” in Syria, taunting Russia for supporting Syrian President Bashar al-Assad after the suspected chemical attack in Douma. Damascus and Moscow have denied any responsibility.

His comments raised the prospect of direct conflict over Syria for the first time between the two world powers backing opposing sides in the seven-year-old civil war.

Heightened geopolitical tensions have piled pressure on investors already rattled by a trade spat between the U.S. and China and a generally more volatile market environment.

“We are seeing this regime shift take place in terms of drivers to volatility,” said Norman Villamin, chief investment officer of private banking at UBP in Zurich.

Villamin expects the VIX .VIX gauge of S&P 500 volatility to stay around the 20 mark - roughly twice its average level last year.

Crude prices eased back after three sessions of strong gains took them to their highest levels since late 2014 on Wednesday.

U.S. crude futures CLc1 last traded down 0.2 percent at $66.66 a barrel, having risen 7.4 percent so far this week. They traded as high as $67.45 on Wednesday.

Brent LCOc1 declined 0.5 percent to $71.73 a barrel, having touched a high of $73.09 on Wednesday.

European government bond yields remained low as caution dominated ahead of ECB minutes and speeches from several ECB members. Germany’s 10-year Bund yield rose 1 basis point to 0.512, staying near the one-week low it hit on Wednesday.

He started adding to government bonds last month for the first time since 2016, hoping to benefit from bonds’ relatively low volatility.

Safe-haven gold XAU= slipped 0.5 percent from an 11-week high after minutes from the Federal Reserve’s policy meeting on Wednesday raised expectations the U.S. could raise rates at a faster pace.
Currency markets settled as some strong risk-averse moves unwound.

The dollar index .DXY rose 0.2 percent to a session high after Trump's latest comments, though it was still near a two-week low. The safe-haven yen JPY= edged lower to 107.09 against the dollar.
The euro EUR= meanwhile fell back 0.3 percent to $1.2329 ahead of the ECB meeting.

Russia’s rouble edged up for a second day after heavy selling due to new punitive sanctions by the United States.

It traded around 61.69 to the dollar RUB=, still down more than 7 percent this week.

The Turkish lira TRY=, which has been highly sensitive to developments in neighboring Syria, recovered slightly to trade at 4.1223 per dollar after hitting a record low of 4.1920 on Wednesday.

The lira is down 2 percent so far this week, also hit by concern about inflation and the central bank’s reluctance to tighten its policy.

Worries about the Middle East have overshadowed budding optimism that Washington and Beijing will work out a compromise to avert a trade war following Chinese President Xi Jinping’s speech on Tuesday.

Sterling set for best quarter since year before Brexit vote

European Stock Markets

Sterling edged down on Thursday as end-of-quarter portfolio rebalancing by investors outweighed encouraging economic data, but the currency is still set for its best quarter against the dollar in almost three years. 

Hopes of a transition deal on Britain’s departure from the European Union - which was eventually agreed earlier this month - and growing expectations that the Bank of England could soon raise interest rates have propelled the pound this year to its highest since the June 2016 Brexit referendum.

Sterling is up roughly 3.9 percent versus the dollar this quarter, its best performance since mid-2015. Against the euro it has risen 1.4 percent since January, and is heading for its best quarter since 2016.

Some investors believe sterling’s good run can extend into the next quarter.

On Thursday, the end-of-quarter flows by investors overshadowed data showing a narrower UK current account gap and an upgrade in fourth-quarter business investment.

Dollar strength and the sense among investors that the British currency may have got ahead of itself have undermined the pound’s rally this week, and some traders say better news is needed next quarter to justify another leg higher.

The pound lost 0.3 percent versus the dollar to $1.4030, bringing week-to-date losses to 0.7 percent.

“On the whole, Brexit concerns have taken something of a backseat since last week and I think markets are focused on data.”

Data on Thursday upgraded Britain’s fourth-quarter business investment to 0.3 percent from flat earlier. Fourth-quarter GDP growth was left unrevised at 0.4 percent while the current account deficit was revised down sharply.

Versus the euro, the pound fell 0.2 percent on Thursday to 87.64 pence per euro.

Tech, trade fears weigh on European shares

European Stock Markets

European stocks tumbled on Tuesday as investors entered the second quarter in a febrile atmosphere of trade tensions and mounting pressure on big technology companies. 

The pan-European STOXX 600 fell 1 percent, while Germany's DAX .GDAXI declined 1.4 percent, with industrials, financials and healthcare stocks the biggest weights.

The tech sector .SX8P dropped 1.6 percent, weighed by chipmakers after an overnight report that Apple plans to replace Intel chips in Macs with its own.

The index has fallen 8 percent in the past three weeks as anxiety grew over big tech companies with the focus on Facebook’s use of data, and regulation of Amazon.

Reports of Apple increasingly going down the “insourcing” route have dented shares in Apple suppliers around the world, most notably Europe’s Dialog Semiconductor (DLGS.DE) which has shed more than 60 percent in the past year.

On Tuesday, STMicro (STM.MI) led fallers, down 3 percent, while ams declined 2.7 percent and Infineon (IFXGn.DE) fell 2.4 percent.

Risk appetite was poor across the board, as European investors followed U.S. and Asian investors to the exit after China retaliated against U.S. tariffs. 

Equities have again entered “oversold” territory, they said, adding, however, that headwinds for technology stocks were increasing.

Outside the tech sector, food services group Sodexo (EXHO.PA) was the worst-performer on the STOXX, down 3.8 percent after Goldman Sachs (GS) cut the stock to “neutral”. Sodexo had already suffered a 15.7 percent decline after warning on profit in the previous session.

Air France (AIRF.PA) shares fell 3.2 percent after the airline said 75 percent of its flights would operate. The flag carrier’s unions called a strike for wage increases amid a wider labour stoppage across France paralysing rail services.

Acquisition news also continued to move the European market.

Eurofins Scientific (EUFI.PA) shares fell 2.9 percent, the worst performers on the STOXX, after the firm acquired Lab Frontier in South Korea.

Italy's largest private broadcaster Mediaset (MS.MI) nabbed the top spot on the FTSE MIB index .FTMIB, up 6.9 percent, after signing a content-sharing deal with Sky's (SKYB.L) Italian unit and paving the way for a broader alliance.

Liberum analysts called the deal a “win-win”.

“This agreement should be a TV advertising revenue booster as it creates larger audiences,” they wrote.

Berenberg upgraded Mediaset to a “buy”, saying the deal marked a “step change in profitability”.

Basic resources and oil and gas stocks were a rare bright spot, making gains as metals prices rose.

European stocks flip up as Draghi talks about keeping up bond buying

European Stock Markets

European stocks latched onto small gains Wednesday, buoyed after European Central Bank President Mario Draghi said its bond-buying program will likely continue if underlying inflation in the region remains subdued.

Meanwhile, investors were sifting through more corporate updates, including one from Adidas AG that sent shares of the German sports gear maker flying higher by double digits.
How markets are moving

The Stoxx Europe 600 index SXXP, +0.26% rose 0.1% to 375.83, led by gains for consumer goods and telecom stocks. But tech stocks lost the most. On Tuesday, the index dropped 1%, largely as the euro and the pound surged against the U.S. dollar.

France’s CAC 40 index PX1, +0.26%  turned up by 0.1% to 5,249.16. Germany’s DAX 30 DAX, +0.19% rose 0.3% to 12,254.03.

The U.K.’s FTSE 100 index UKX, +0.24% rose 0.3% to 7,1621.44, but Spain’s IBEX 35 IBEX, +0.12%  fell 0.3% to 9,658.40.

The euro EURUSD, -0.1695%  bought $1.2373, down from $1.2392 late Tuesday in New York.
What’s driving markets

Regional indexes began to rotate higher as the euro pulled back during a speech by ECB President Mario Draghi at conference in Frankfurt. He did say the eurozone economy has been strengthening more than it had anticipated.

However, “there is a very clear condition for us to bring net asset purchases to an end: we need to see a sustained adjustment in the path of inflation towards our aim, which is a headline inflation rate of below, but close to 2% over the medium term,” he said, adding that “the performance of underlying inflation remains subdued compared with previous recoveries.”

The euro declined as soft inflationary pressures would likely keep the European Central Bank from raising interest rates in the foreseeable future. “The key issues we need to examine are wage dynamics, their pass-through to prices, and the possible risks to the inflation outlook,” said Draghi.

A weaker euro can help bolster shares of European exporters as it makes their goods and services less expensive to purchase for overseas buyers. The euro on Tuesday leapt above $1.24 for the first time since March 8 after an expected reading of U.S. consumer prices February tamped down concerns that the Federal Reserve will raise interest rates four times in 2018 instead of three as previously expected.

The eurozone’s final reading of consumer price inflation for February is scheduled for release on Friday.

Adidas AG shares ADS, +7.49% jumped 9% for the Stoxx Europe 600’s biggest gain after the sporting goods company upgraded its long-term profitability target even as its posted a fourth-quarter net loss due to a one-off negative tax effect. Adidas will also propose lifting its dividend of €2.60 a share and that it will initiate share buyback program of up to €3 billion.

Shares in Inditex SA ITX, +1.07% fell 2.6% as the parent company for apparel retailer Zara said sales in stores that have been open for a year or more rose 5%, a marked slowdown from the 10% growth reported the previous period.

Prudential PLC PRU, +5.29% climbed 5% after the financial services company saying it will demerge M&G Prudential. Following that move, M&G Prudential will be an independent provider of savings and investment services.

European Stocks Drift as Bonds Rise; Dollar Slips: Markets Wrap

European Stock Markets

European stocks struggled for traction and bonds across the region followed Treasuries higher after the European Central Bank was said to be likely to make only small adjustments to its guidance on monetary policy next year.

The Stoxx Europe 600 Index was little changed, with construction and retail stocks leading the decline.  German shares slipped as the country’s political stalemate continued.

 Earlier, stocks in Asia recovered some of their recent losses, with Chinese equities rallying as investors reassessed a crackdown on shadow banking that had shaken confidence. The euro steadied after dropping the most in three weeks on Monday, and the dollar nudged lower.

Meanwhile, sterling inched higher amid reports Prime Minister Theresa May has the backing of ministers to offer the European Union more money to break the Brexit deadlock. Turkey’s lira hit a record low against the dollar but pared some of the drop after its central bank tightened liquidity.

Investor focus stayed on Europe after officials said the ECB is likely to make multiple small adjustments to its guidance on monetary policy next year rather than any major change in language as it ends quantitative easing.

Political developments in Germany are being closely watched even though some have concluded that economic growth won’t be threatened by the collapse in talks between Merkel and potential coalition partners. The German Chancellor said she would prefer new elections if she can’t put together a majority.

In the U.S., confirmation that Federal Reserve Chair Janet Yellen will leave the board in February creates a fourth vacancy for President Trump to fill, making it trickier for investors to bet on the central bank’s interest rate trajectory next year.

While the Thanksgiving holiday gives traders an excuse to pause, equities are heading into the end of the year near their peaks, with investors optimistic about global growth and company earnings.

Elsewhere, the Australian dollar dropped to a five-month low after suggestions from the central bank that interest rates will stay lower for longer. West Texas oil rose toward $57 a barrel before U.S. government data forecast to show crude stockpiles resumed declines.

Euro races past the $1.18 line as inflows intensify

European Stock Markets

The euro popped above the 1.18 line for the first time in three weeks on Wednesday as investors resumed buying European equities while the dollar found itself on the back foot for a second day as U.S. bond yields decline. 

With the euro zone’s annual economic growth rate outstripping that of the United states in the third quarter, led by Germany, markets are increasingly optimistic about the region’s outlook.

The single currency punched through a key technical level of $1.1734 on Tuesday and extended gains on Wednesday to rise 0.2 percent at $1.1824 against the dollar.

Over the last few sessions, unhedged purchases of European stocks have picked up noticeably after declining in October.

Despite the rise, some investors remain sceptical about the outlook for the currency, with a Bank of America Merrill Lynch fund manager survey for November pointing out that the percentage of investors saying the euro is overvalued has grown to 12 percent from 4 percent in the previous month.

Elsewhere, the Australian dollar was the big mover of the Asian session, skidding 0.6 percent against its U.S. counterpart to $0.7587, brushing its lowest levels since July.

Data showed Australian wages rose only 0.5 percent in the third quarter and 2.0 percent for the year, falling short of 0.7 percent and 2.2 percent respectively and challenging the Reserve Bank of 

Australia’s view that wages would pick up.

The dollar fell for a second session as falling U.S. stocks and declining U.S. yields weighed on the greenback.

The dollar index fell 0.3 percent to 93.558 on Wednesday as investors awaited U.S. consumer inflation data for October, due later on Wednesday, that is expected to show a marginal increase in consumer prices.

Weaker commodities drag European shares to eight-week low; Airbus rallies

European Stock Markets

A fall in commodity stocks and continued profit taking sent European shares to an eight-week low on Wednesday, but Airbus rallied after winning its biggest order. 

Crude oil’s price slide on worries over the outlook for demand and weaker metal prices weighed on mining and energy stocks like Rio Tinto (RIO.L) and Royal Dutch Shell (RDSa.L).

Their falls helped send the pan-European STOXX 600 index down 0.6 percent to its lowest level since Sept. 20.

The index was on track or its seventh session of straight losses, its longest losing streak since October 2016 when markets fell in the run-up to the U.S. presidential elections.

The UK's top share index FTSE 100 .FTSE declined 0.4 percent and Germany's export oriented DAX .GDAXI index fell 0.6 percent, weighed down by a stronger euro

Banks .SX7P were also among the biggest losers, down 1 percent, but falls were spread across sectors as investors continued to take profits following this year’s rally.

The STOXX 600 is still up nearly 6 percent so far this year.

Deutsche Bank strategists led by Sebastian Raedler expect the STOXX 600 to end the year at 395 points, 3 percent above current levels, before falling back to 375 in the first months of 2018

On the earnings front, data from Thomson Reuters IBES data show that 48 percent of companies 

listed on the euro zone MSCI EMU index have beaten analyst expectations while 40 percent have missed them. Earning beats stand at 53 percent for the broader MSCI Europe index and at 72 percent for the U.S.’s S&P 500.

Germany’s Lanxess (LXSG.DE) was among the biggest fallers on the STOXX on Wednesday, down 3.2 percent, after its earnings update did not provide any positive surprise. 

On the positive side, Airbus (AIR.PA) rose 3.4 percent.

Airline pioneer Bill Franke placed a historic order for 430 A320neo-family jets in a deal worth $49.5 billion at list prices that marks a dramatic turnaround for Airbus, which had been lagging behind Boeing in the contest for orders.

The deal is one of the industry’s biggest deals by volume and the most planes sold by Airbus in one batch.

Tesco wins UK regulator's provisional approval for Booker takeover

European Stock Markets

Tesco (TSCO.L) won provisional approval for its 3.7 billion pound ($4.9 billion) takeover of wholesaler Booker (BOK.L) from the UK competition regulator on Tuesday, moving Britain’s biggest retailer closer to securing a new avenue of growth. 

The Competition and Markets Authority (CMA) said it had conducted an in-depth review and provisionally concluded that Tesco’s purchase of Booker does not raise competition concerns.

The provisional unconditional clearance will come as a major relief to Tesco. Most analysts had expected that Tesco would have to agree store disposals to gain clearance.

Both Tesco and Booker, the country’s biggest grocery wholesaler, welcomed the CMA announcement. Tesco said it expected to complete the deal, which also requires shareholder approvals, in early 2018.

Shares in Tesco and Booker were up 4.8 percent and 5.1 percent respectively at 0905 GMT.

Bernstein analysts said they expect some uncertainty to remain, with the focus shifting to whether investors will approve the deal.

Their analysis indicates that Tesco will achieve the required 50 percent shareholder approval and that the focus will be on Booker, where the threshold is 75 percent.

“With a higher shareholder hurdle and the Tesco share price below the level when the bid was made (about 2 pounds), Booker shareholders may argue for a higher share price,” the broker’s analysts said.

For each Booker share, Tesco is offering 0.861 new Tesco shares and 42.6 pence in cash.

The CMA said it found that Tesco as a retailer and Booker as a wholesaler supplying caterers and independent retailers Premier, Londis, Budgens and Family Shopper do not compete head-to-head in most of their activities.

In particular, it found that Tesco does not supply the catering sector that accounts for more than 30 percent of Booker’s sales.

The proposed deal is Tesco Chief Executive Dave Lewis’s boldest move yet. He believes it will provide a new source of growth by giving the group access to the fast-growing “out of home” food market, given Booker’s role as a distributor to the catering industry.

Some Tesco shareholders have criticized the bid, saying Tesco is overpaying and that it will distract from the company’s turnaround plan.

Rival wholesale groups have also called for the takeover to be blocked.

Banking stocks, dollar hit by U.S. doubts

Banking stocks dropped and the dollar slipped on Wednesday as doubts over tax cuts and bond market moves hurt profitability and raised questions over the longevity of the current expansion in the United States. 

European banking stocks were the worst performing sector as share indexes across the continent opened lower, following a poor session for U.S. banks. 

The dollar edged lower against a basket of currencies .DXY, hurt by a media report that suggested the implementation of a centrepiece corporate tax cut under discussion in U.S. tax reforms plans could be delayed. 

Derek Halpenny, head of global markets research at Mitsubishi UFJ in London, said he was dubious over the progress of the tax cuts programme being urged by U.S. President Donald Trump’s campaign.

Francois Savary, chief investment officer at Prime Partners, said the doubts over the tax issue reinforce the case for some consolidation in the market, which has been fully priced for good news.

Overnight, Goldman Sachs (GS.N) shares lost 1.51 percent and weighed the most on the main stock index. 

This came after the U.S. 2-to-10-year Treasury yield curve hit its flattest in a decade, potentially cutting into the profits of banks, which borrow money at short-term interest rates in order to lend it out at longer terms. US2YT=RR US10YT=RR 

Such a move can also imply that investors are expecting a slowdown. 

European bonds were also snared by this yield curve flattening phenomenon, with yields on long-term German bonds falling to two-month lows on Wednesday. 

Analysts believe that a flattening yield curve at a time when the Federal Reserve is hiking rates is a sign that investors are concerned over the sustainability of economic growth and inflation in the world’s biggest economy. 

In the European session, the two main banking indices suffered the most, falling 1.1 percent .SX7E and 0.9 percent .SX7P respectively, dragging an index of pan-European stocks lower 0.2 percent.

BoE set for hike, Fed to get new head, trillion-dollar Apple?

European Stock Markets

Traders were bracing on Thursday for landmark events including the Bank of England’s first rate hike since 2007 and the unveiling of a new Fed chief as well as results from Apple as it looks to become the world’s first $1 trillion company.

The British central bank is widely expected to announce a 25 basis point rise in interest rates from record lows at 1200 GMT, even though economic growth appears weaker than before any increase in borrowing costs in the past 20 years. 

With a hike largely priced in, sterling GBP= was barely changed against a marginally weaker dollar .DXY. 

European government bond yields inched up while stocks in the region edged back .FTEU3 after hitting two-year highs on Wednesday. [.EU] 

“The interesting thing about the BoE is the vote and the size of the majority, and secondly the context around that which we will get from the inflation report,” said JPMorgan Asset Management’s International CIO of fixed income Nick Gartside. 

The dollar meanwhile gave up some of the gains that have lifted it to a 3-1/2 month high this week. [/FRX] 

The Federal Reserve bolstered bets on a third U.S. rate hike of the year on Wednesday, but the focus is now on delayed tax cut plans due later and Donald Trump’s expected nomination of Jerome Powell to replace Janet Yellen to lead the central bank. 

Asian shares up on Fed optimism, sterling firms ahead of expected BOE hike

Asian Stock Markets

Asian shares inched higher on Thursday after the U.S. Federal Reserve said economic growth was solid, virtually cementing the case for a December rate rise even as investors braced for what is expected to be the Bank of England’s first hike in more than 10 years.

Futures hinted at weaker openings for European bourses, with European stock futures STXEc1 down 0.2 percent while Dax futures FDXc1 and FTSE futures FFIc1 each shed 0.3 percent. CAC futures FCEc1 down 0.1 percent. 

Investors were wary as they awaited the nomination of the next head of the U.S. central bank, as well as a tax bill from squabbling Republicans in the U.S. House of Representatives. Both were expected later in the session. 

After a one-day delay, the tax plan is said to include $6 trillion in tax cuts over 10 years but is unlikely to define how these would be offset as Republicans remain split over how to pay for them.

The BoE is expected to raise rates later in the session (1200 GMT) to tamp down inflation, which has picked up to a five-year high despite weakening economic growth. 

But most economists polled by Reuters say a rate hike now would be a mistake as uncertainty builds ahead of Britain’s planned departure from the EU in March 2019. 

Sterling firmed 0.2 percent to $1.3282 GBP=D3 ahead of the decision. U.S. S&P e-mini futures ESc1 were down 0.2 percent.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was nearly flat in late afternoon trade, after earlier climbing to its highest levels since November 2007. 

Australian shares touched a two-and-a-half year high in early trade but reversed gains to close down 0.1 percent.

China's blue-chip CSI300 index .CSI300 was down 0.2 percent, while the Shanghai Composite Index .SSEC shed 0.4 percent. 

Japan's Nikkei stock index .N225 finished up 0.5 percent at its highest close since late June 1996, gaining 2.4 percent in a holiday-shortened week. Japanese markets will be closed for a national holiday on Friday. 

The White House plans to nominate current Fed Governor Jerome Powell as the next chair when Janet Yellen’s term expires in February, a source familiar with the matter said on Wednesday.

U.S. tax reform move boosts dollar, stocks, bond yields

European stocks, the dollar and bond yields climbed on Friday as investors speculated on the return of the “Trumpflation trade”, after the U.S. Senate approved a budget blueprint that paves the way for tax cuts.

With sentiment broadly risk-on, European shares rebounded from their worst day in two months, also helped by well-received earnings reports for Volvo and Ericsson and high German producer-price inflation numbers

Japan's Nikkei stock index logged its longest winning streak in more than half a century, while the dollar hit a more-than three-month high against the yen JPY=. 

The VIX “fear index”, which briefly spiked close to 12 on Thursday, was back down below 10 .VIX.

Thursday’s Senate vote pushed 10-year U.S. Treasury yields to their highest in more than a week at 2.3650 percent. 

While European bond yields were also pulled higher, the “transatlantic spread” between Treasury yields and their German equivalents stretched to 197 basis points, its widest since June. US10YT=RR, DE10YT=RR. <GVD/EUR>. 

The dollar index - which tracks it against a basket of six other major currencies - climbed 0.3 percent to a three-month high .DXY. 

The Republican-controlled Senate voted 51 to 49 for the budget measure, which paves the way for taxes to be reformed in the 2018 fiscal year without support from the Democrats, and which would add up to $1.5 trillion to the federal deficit over the next decade.

Bets that Trump’s planned tax cuts, infrastructure spending and other pro-business measures would push up growth and inflation had been behind a “Trumpflation trade” that sent the dollar to 14-year highs earlier this year. 

But as doubts have grown about Trump’s ability to push through reforms, that trade had been unwound and the dollar has slipped around 10 percent.

MSCI world equity index .MIWD00000PUS, which tracks shares in 47 countries, was a touch lower but only around 0.2 percent below record highs hit the previous day. 

U.S. stock futures rose quarter of a percent ESc1, pointing to a firmer start on Wall Street.