Euro climbs with ECB rate-hike debate - sterling jumps

European Stock Markets

The euro rose on Monday that European Central Bank officials were shifting their debate from bond purchases to the expected path of interest rates, reviving bets that the ECB may raise rates sooner than previously thought. 

Sterling pushed to its highest against the euro in more than five weeks and against the dollar in more than a month, as Britain and the European Union appeared to reach a broad agreement on a post-Brexit transition period and the Irish border.

The debate among ECB policymakers is increasingly about the steepness of the rate path, as some want future expectations contained given the slow rebound in inflation, five sources with direct knowledge of the discussion.

In late-afternoon U.S. trading, the euro zone single currency was last up 0.46 percent, at $1.2344. 

But the euro weakened against the pound on relief over the latest development in talks between Britain and the European Union on a Brexit agreement, which raised optimism about a smoother departure for Britain from the trading bloc. 

Sterling was last up 0.18 percent, at 87.95 pence per euro. It was up 0.67 percent, at $1.4035, against the dollar. 

The strength in euro and sterling put downward pressure on the dollar as traders speculated whether the Federal Reserve may signal a faster pace of rate increases in the coming months as the labour market tightens further. 

The Federal Open Market Committee, the U.S. central bank’s policy-setting group, will meet on Tuesday and Wednesday. Rates futures imply traders have fully priced in a rate increase which would raise the target range to between 1.50 percent and 1.75 percent. 

A sharp sell-off in Wall Street stocks likely added more pressure on the dollar.

The dollar index, which tracks the greenback versus a basket of six other major currencies, fell 0.45 percent to 89.826. 

The futures market showed speculators bet on the dollar deteriorating further. 

Their net short positions against the greenback grew to a five-month high last week, according to Commitments of Traders data released on Friday.

European shares boosted by good results from insurance heavyweights

European Stock Markets

European shares rose on Thursday, buoyed by good results from companies including insurance heavyweights Munich Re (MUVGn.DE) and Generali (GASI.MI), while Societe Generale (SOGN.PA) fell after its deputy CEO unexpectedly resigned. 

SocGen shares slid 2.5 percent after the French bank said Didier Valet was leaving ‍following “a divergence of approaches regarding management of a specific legal matter”, without elaborating.

A source familiar with the matter said the divergence related to investigations over the suspected rigging of the Libor interbank rate, and brokers raised concerns over the impact of litigation.

SocGen shares fell as much as 4.3 percent to their lowest level in more than 2 months, but staged a late recovery to end down 0.7 percent.

Gains in the insurance sector .SXIP and strength among tech stocks .SX8P, however, helped push the pan-European STOXX 600 index up, accelerating gains in afternoon trading. It ended the day up 0.5 percent after two days in the red.

Tensions on trade took a back seat as investors turned their focus back to earnings updates.

Munich Re (MUVGn.DE) shares rose 2.8 percent after the world’s largest reinsurer raised its 2018 profit forecasts and said it planned to buy back 1 billion euros in shares.

Generali (GASI.MI) also rose 2.5 percent after it raised its dividend following record operating profit.

Following on from rival Inditex’s disappointing results on Wednesday, Swedish clothing firm H&M (HMb.ST) published lower-than-expected quarterly sales, sending shares in the world’s second-biggest fashion retailer down 4.6 percent.

Dufry (DUFN.S) shares fell 6.2 percent after results, with traders attributing the drop to a lack of clarity on its dividend plans.

Banks .SX7P rose slightly after the European Central Bank released long-delayed guidelines on treating new soured bank debt. The guidelines will go into effect on April 1 but lenders may get a reprieve from full implementation until 2021.

Italian banks .FTIT8300, which hold nearly one third of the euro zone bad loan pile, gained 1.4 percent.

Meanwhile oil and gas stocks .SXEP were the worst-performers, down 0.2 percent, tracking a dip in crude prices after the U.S. announced expanded sanctions against Russians.

Overall, fourth-quarter earnings for the STOXX 600 are expected to increase 15.8 percent from Q4 2017, and more companies than usual have beaten earnings and revenue estimates.

ECB eyes at baby step towards stimulus exit

European Stock Markets

The European Central Bank is all but certain to keep policy unchanged on Thursday but may tweak its communication stance to offer at least a few clues about its progress towards ending its unprecedented bond purchases later this year. 

Having revived euro zone growth with lavish stimulus, the ECB is now debating whether to step back and preserve its remaining firepower. But concerns over low inflation, a strong euro, rising political risk and recent market volatility are expected to prevail for now.

Having promised to review their communication stance in “early” 2018, however, and with asset purchases due to expire in September, policymakers are likely to give investors at least a few hints to prepare them for a broader revision of policy around the summer months, economists predicted.

The ECB announces its policy decision at 1245 GMT, followed by ECB President Mario Draghi’s news conference at 1330 GMT, which will also include a quarterly update of economic projections.

The dichotomy facing the ECB is that while growth has blown past expectations, inflation remains weak, having hit a 14-month low in February and staying well short of its target of almost 2 percent.

While the bloc’s five-year growth run and a rapid drop in unemployment suggest that inflation will eventually rise, its rebound is still months away, complicated by the euro’s rise against the dollar, which puts a lid on price growth.

The single currency was trading at $1.24 on Thursday, a touch below a three-year high hit last month.

Risks of a trade war with the United States, an inconclusive election in Italy and falling bank share prices could add to caution, economists predicted.

New economic projections are also not likely to trigger a bigger policy shift since they are expected to confirm earlier expectations, pointing to an eventual rise in inflation but still indicating a lack of convincing underlying price pressures.

The biggest change on the agenda is likely to be a proposal to drop the bank’s so-called easing bias, which stipulates that bond buys could be increased if needed.

While few if any actually expect purchase volumes to rise, such a tweak would suggest policymakers are increasingly confident that their 2.55 trillion bond buys could finally end this year after several extensions. 

For now, the ECB’s benchmark deposit rate will stay at minus 0.4 percent and monthly bond buys will continue at 30 billion euros per month.

European share rebound loses steam, steel stocks gain on US move

European Stock Markets

European shares dipped in choppy trade on Monday as a poor update from Reckitt Benckiser (RB.L) hit consumer staples, outweighing gains among financials and strength in steel makers after the U.S. outlined proposals for hefty import curbs. 

Shares in Tenaris (TENR.MI), Outokumpu (OUT1V.HE) and Arcelor Mittal (MT.AS) - which have facilities in the United States - were the biggest gainers in Europe, up between 1.7 and 3.1 percent.

Their gains and strength in financial stocks helped STOXX 600 post small gains at the open but the pan-European benchmark index was later dragged lower by a fall in consumer staple stocks. The index was down 0.1 percent by 0930 GMT.

Monday’s slight decline took place after the STOXX posted a 3.3 percent gain last week when strength of corporate updates and a return of inflows into equity funds helped global equities rebound from a turbulent start of the month.

The index needs to rise another six percent to climb back to the 2-1/2 year peak hit at the end of January.

Reckitt Benckiser (RB.L) missed profit expectations and its profit margins declined, hurt by a tougher pricing environment in developed markets and increased commodity costs. It said these issues would continue in the near term. [nL8N1Q910Z]

Reckitt Benckiser (RB.L), the maker of Durex condoms, Lysol disinfectant and Mucinex cold medicine, fell 5.4 percent. Shares in Unilever (ULVR.L), Diageo (DGE.L), Nestle (NESN.S) and Danone (DANO.PA) also declined.

Analyst at Investec affirmed their sell rating on Reckitt following the update, saying operating margin missed expectations and sales growth fell a little short of the more optimistic hopes given the strong flu performance from peers.

The U.S. Commerce Department has recommended that President Donald Trump impose steep curbs on steel and aluminum imports from China and other countries ranging from global and country-specific tariffs to broad import quotas. [nL2N1Q60V8]

Morgan Stanley analysts said the European Commission could respond with measures to limit steel imports to the European Union, and that ArcelorMittal and SSAB (SSABa.ST) would benefit the most from rising U.S. spreads. SSAB rose 2.5 percent.

Banks .SX7P were among the leading gainers, up 0.4 percent. The sector was supported by a 1.6 percent gain in shares of Deutsche Bank (DBKGn.DE) after analysts at BofA Merrill Lynch upgraded the German lender to neutral on optimism over investment banking trading revenues. [nL8N1Q911U]

German industrial giant Siemens (SIEGn.DE) rose one percent after announcing plans to list its healthcare division in the first half of the year.

Mercedes maker Daimler (DAIGn.DE) was a weak spot, down 1.7 percent, after reports said U.S. investigators probing Daimler had found that its cars were equipped with software which may have help them to pass diesel emissions tests. [nL8N1Q8080]

M&A activity brightens lacklustre European stock markets

European Stock Markets

A European recovery rally dissipated on Thursday with benchmarks across the region weighed down by commodities and technology stocks, while acquisition approaches sent Danish telecoms group TDC and Swiss insurer Swiss Re flying.

Europe’s STOXX 600 share index fell 0.2 percent by 0830 GMT, pulled lower by a 1.1 percent fall in basic resources .SXPP, and weaker industrials stocks. The index was still down 2.5 percent year-to-date after equities worldwide took a battering this week.

Financials limited the damage, with euro zone banks .SX7E gaining 0.5 percent after strong earnings from UniCredit and Societe Generale.

Merger and acquisition activity drove the top European gainers.

Danish telecoms company TDC (TDC.CO) led the STOXX 600, shooting up 16 percent and on track for its best day since June 2007, after a takeover approach from Macquarie and three Danish pension funds, which it rejected.

Swiss Re (SRENH.S) shares jumped 6 percent after the reinsurer said it was in talks with Japan’s SoftBank (9984.T) to sell a minority stake.

Strong results also boosted some stocks as investors’ focus turned back to the European earnings season.

Societe Generale (SOGN.PA) shares jumped 5.5 percent after the bank reported forecast-beating results despite a quarterly drop in profits.

Compass Group (CPG.L), the world’s biggest catering firm, jumped 6.2 percent after it raised its expectations for revenue growth.

Chipmaker AMS (AMS.S) gained 4 percent, with traders citing an upgrade to ‘overweight’ by JP Morgan. Schibsted (SBSTA.OL) sank 5.6 percent after traders said its third-quarter earnings missed forecasts.

Euro holds near three-year highs as rising yields fail to lift dollar

European Stock Markets

The euro held above $1.25 on Friday, continuing a strong week in which rising U.S. treasury yields failed to lift the dollar while the euro zone’s economic revival and expectations of monetary tightening made the single currency more attractive. 

Yields on 10-year U.S. Treasuries have risen to near their four-year high as economic growth and buoyant oil prices drive up inflation expectations and central banks start sounding more hawkish.
But the rise in yields, which should push up the dollar, hasn’t helped it so far.

A survey released on Thursday showed eurozone manufacturing continued to boom last month, bolstering expectations that the European Central Bank is on track to normalise monetary policy.

The euro traded flat against the dollar on the day at $1.2505, within sight of last week’s three-year high of $1.2538. For the week, the euro has gained around 0.6 percent.

Against a basket of currencies, the dollar was broadly flat as the market awaits non-farm payroll data due later on Friday.

Elsewhere, the dollar added to recent gains against the Japanese yen, helping it move away from a four-month nadir of 108.28 hit a week ago. The dollar rose 0.4 percent on the day to 109.82

On Friday, the Bank of Japan offered to buy an unlimited amount of JGBs with more than five to 10 years left to maturity at 2 basis points above the previous close. It also increased the amount of its planned buying in five- to 10-year JGBs to 450 billion yen from the previous 410 billion, an amount it had kept since late August.

Foreign exchange markets showed little reaction to the Japanese central bank’s move.

The Chinese yuan continued its recent rise against the dollar, notching up a high of 6.2773, a 2 1/2-year high. The yuan is up 0.8 percent for the week and was last trading at these levels in August 2015.

Equities battle rising global bond yields to snap end-January losing streak

Global Stock Markets

World stocks rose on Thursday after three days of losses and European shares opened higher, although U.S. and German bond yields near multi-year highs checked the gains and kept stocks from regaining recent record highs.

Wall Street is set for a firmer session, equity futures indicate ESc1, before tech giants Apple (AAPL.O), Alphabet (GOOG.O) and Amazon.com (AMZN.O) announce their results.

MSCI's all-country equity index .MIWD00000PUS rose around 0.2 percent after Tokyo bounced 1.7 percent off four-week lows. European bourses opened around 0.3 percent firmer .N225. MSCI's emerging Asian index closed 0.3 percent lower however.


This week’s meeting of the U.S. Federal Reserve was more hawkish than expected, but confirmed what markets had already expected - an interest rate rise in March, said Markus Huber, a trader at brokerage City of London Markets.

Global equity markets are torn between buoyant economic growth and double-digit company earnings, on the one hand, and the possibility that U.S. and euro zone central banks will tighten policy faster than expected.

The growth momentum was confirmed by manufacturing activity surveys on Thursday that showed Asian factories getting off to a strong 2018 start and Europe posting solid growth.

Boeing and Facebook were the latest to reinforce the solid U.S. earnings growth picture. European markets cheered improved performance at Unilever and Royal Dutch Shell (ULVR.L) (RDSa.L)
Huber said results from the likes of Amazon and Apple would be crucial.

Equity bullishness is being tempered, however, by rising global bond yields. The Fed held interest rates unchanged on Wednesday but raised its inflation outlook, no longer saying it expected price growth to stay below 2 percent. It also flagged “further gradual” rate increases.

That wording convinced many that rates could rise four times this year, rather than three.

U.S. 10-year Treasury yields surged to near four-year highs above 2.75 percent after the Fed statement, while German Bund yields are at two-year highs US10YT=RR DE10YT=RR.

Two-year U.S. yields are approaching decade-highs and could rise further should jobs data due on Friday confirm sustained labour market strength.

Pressure is building on euro zone authorities, too, to curb stimulus, with employment at record highs and Thursday’s manufacturing surveys confirming the bloc’s growth boom.
 
On currency markets, the dollar’s post-Fed bounce fizzled, pushing it down around 0.2 percent against a basket of currencies. The euro gained to $1.2445, just off three-year highs of $1.2538.

The British pound GBP=D4 rose 0.4 percent, after a 5 percent gain in January, its biggest monthly rise since May 2009, owing to broad dollar weakness and expectations of a Brexit deal more favourable to the UK.

Sterling consolidates above $1.43 as dollar dives

European Stock Markets

Sterling settled above the $1.43 line for the first time since the June 2016’s EU referendum as optimism around Brexit and growing expectations of an interest rate increase later this year encouraged investors to add to long positions. 

A deepening selloff in the dollar also lifted the British pound, with a trade-weighted index trading at its highest level since end-June 2016.

The pound rallied more than half a percent against the dollar to a high of $1.4346 before stabilising around the $1.43 line.

It is on track for its best month against the dollar in almost nine years, with a 6 percent climb so far in January.

The euro also slipped below 87 pence for the first time since June 2017 and the Bank of England’s trade-weighted sterling index touched its highest since June 30, 2016.

Until now much of sterling’s appreciation against the dollar has been attributed to broad weakness in the U.S. currency, but it has become clear this week that investors have become more bullish on the pound independently.

Data published last Friday showed speculators increased their net-long positions on sterling -- or bets that it would rise -- to the highest level in 3-1/2 years in the latest week, and that trend shows no sign of having abated.

But some analysts pointed out that further gains may be tough for the British currency.

French President Emmanuel Macron, for example, said last weekend that Britain would be able to have a bespoke deal with the trading bloc -- one of Prime Minister Theresa May’s objectives -- although he also said London’s financial centre could not enjoy the same level of access to the EU under May’s current Brexit plan.

But some fear that so much optimism may prove misplaced.

Sterling’s latest rally began in earnest in mid-December, when May succeeded in securing a deal to move Brexit talks on to discussions of a transition deal and trade.


The euro is itself benefiting from optimism around a strengthening economy and a central bank that is moving towards tighter monetary policy. Investors will be given fresh cues for the single currency when the European Central Bank wraps up a policy meeting later in the day.

ECB meets as euro hits three-year high

European Stock Markets

The euro steadied at a three-year high on Thursday and shares inched back as traders waited to see if the European Central Bank would try to cool the currency’s hottest run in nearly four years. 

Concerns about U.S. protectionism kept the dollar weak after its worst day in six months, but it was the ECB’s first meeting of 2018, and when it will end its 2.6 trillion euro stimulus programme, that was attracting attention.

Another challenge facing policymakers is how to address the euro’s surge - it hit a three-year high of over $1.24 on Thursday - as this could dampen inflation and endanger the work done by years of unprecedented stimulus.

Euro zone bonds were again reducing the premium offered by former debt crisis countries like Greece, Portugal and Spain compared with ultra-safe German debt, but it will be a delicate balancing act for ECB chief Mario Draghi. [GVD/EUR]

Oil prices, which are a major driver of inflation, hit $71 per barrel in Asian trading for the first time since 2014. [O/R]

The uncertainty about the ECB made for a quiet start for European shares. The pan-European STOXX 600 barely budged as Germany's exporter-heavy DAX .GDAXI index fell 0.2 percent to offset small gains on London's FTSE .FTSE and France's CAC 40 .FCHI. [.EU]

Trading updates saw drinks giant Diageo (DGE.L) warn its sales were being crimped by the resurgent pound. Sterling hit its highest in six months against the euro on Thursday, having also bounded back to its pre-Brexit vote levels against the dollar this week. [GBP=D4]

In the tech sector, Software AG (SOWGn.DE) fell 3.7 percent as it reported a drop in core profits, while Nordic bank Nordea’s results (NDA.ST) also proved a drag. [.EU]

Asian trading had been a mixed bag, with many of the moves driven by the weakening of the dollar.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS touched an all-time peak for the ninth session in a row, but Japan's Nikkei .N225 fell 1.1 percent, hit by the yen's latest jump against the greenback.

MSCI ACWI .MIWD00000PUS, the index provider’s broadest gauge of the world’s stock markets, consolidated its more than 6.5 percent gains for the month

A new Reuters poll of over 500 economists showed the global economy is expected to grow at the fastest pace since 2010.

The upbeat mood, however, has come up against renewed fears of protectionism by the United States after President Donald Trump’s decision to impose steep import tariffs on washing machines and solar panels earlier in the week.

U.S. Commerce Secretary Wilbur Ross, hinted at other measures against China too on Wednesday, saying at the annual Davos meeting that Washington was investigating whether there was a case for taking action over China’s infringements of intellectual property.

Trump is scheduled to speak in Davos on Thursday.

Analysts say they cannot remember any U.S. Treasury Secretary openly embracing a cheaper dollar, at least in the last two decades or so.

The dollar’s index against a basket of six major currencies .DXY =USD tumbled to a three-year low of 88.816 before steadying in European trading. It has fallen 1.9 percent so far this week.

The dollar had also slipped to as far as 108.74 yen JPY=, its lowest since mid-September, and to its weakest against the Chinese yuan since November 2015. CNY=CFXS It is on course for its biggest ever monthly fall against the yuan.

Booming Europe; Dollar slides on U.S. Mnuchin remarks,

European Stock Markets

The U.S. dollar hit fresh lows on Wednesday after U.S. Treasury Secretary Steven Mnuchin said he welcomed its weakness and figures showed that the euro zone economy started the year at its strongest pace in over a decade. 

Fear of protectionism from the world’s largest economy had already pushed the greenback lower, but this move was given another push by Mnuchin’s remarks at the annual Davos summit of business and political leaders.

Meanwhile euro zone businesses had a much better start to 2018 than anyone polled by Reuters expected, ramping up activity at the fastest rate since the middle of 2006, a survey showed on Wednesday.

The euro hit a three-year high of $1.2345, the dollar fell below 110.00 yen for the first time since September and hit new three-year lows on a trade-weighted basis, while sterling was at its highest level against the greenback since the Brexit referendum vote in June 2016.

U.S. President Donald Trump is due to speak Friday at the World Economic Forum in Davos, Switzerland, and investors are concerned he will use the speech to signal a more protectionist policy stance.
 
Trump slapped steep tariffs on imported washing machines and solar panels on Monday, giving a boost to Whirlpool Corp and dealing a setback to the renewable energy industry in the first of several potential trade restrictions.

Fresh signs of growth elsewhere in the developed world provided compelling alternatives for investors worried about the greenback.

Japan’s exports to China and Asia hit record levels as shipments rose for a 13th straight month in December and manufacturing growth hit a four-year high in January, pointing to an economy that powered through the fourth quarter and into 2018.

Meanwhile the euro EUR= surged to a fresh three-year high of $1.2345 ahead of Thursday's European Central Bank meeting, which is in focus following recent commentary that the central bank could change its policy guidance early this year.

This after the euro zone’s economy outpaced that of the U.S. in 2017 and shows further signs of strength in the New Year.

In a strong sign of the positive sentiment towards the region, Spain generated over 40 billion euros of demand in a sale of 10-year government bonds in what is likely one of the largest order books in Europe ever.

Most low-rated “peripheral” euro zone government bond yields are now trading at their lowest level against benchmark German peers in years; another sign of confidence in the region.

Most emerging market currencies climbed on Wednesday, with the yuan and South Africa’s rand both touching a more than two-year high as the dollar extended in its weakest run since 2010-11.

MSCI’s world equity index .MIWD00000PUS, which tracks shares in 47 countries, hit new highs in a continuation of a long running theme but on Wednesday it was a bit more of a mixed picture.

Wall Street scaled new heights overnight on the back of U.S. President Donald Trump’s tax cuts, which will see J.P. Morgan implement a $20 billion investment plan.

But MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS eased 0.2 percent, having jumped 1.2 percent on Tuesday to an all-time peak.

European shares were also mixed, with a decline in utility stocks and tumbling tech stocks on fresh Apple worries weighing although a strong update from Novartis NOVN.S provided support.

The British pound GBP= also powered above $1.41, its highest since the vote to leave the European Union in June 2016, aided by the weak dollar and optimism around Britain's chances of securing a favourable Brexit deal. [GBP/]

The dollar’s decline has been a boon to commodities priced in the currency, with gold edging up to $1,341.81 an ounce XAU=.

Oil prices were consolidating after jumping more than 1 percent on Tuesday when Brent crude hitting $70 a barrel for the first time in a week.

Brent futures LCOc1 was off 22 cents at $69.75, still not far off the three-year high of $70.37 reached on Jan. 15, while U.S. crude CLc1 was marginally higher 4 cents to $64.52 a barrel.

European stocks rally on U.S. shutdown deal, DAX hits record

European Stock Markets

European shares rose to new highs on Tuesday after U.S. senators struck a deal to end a three-day government shutdown.

Euro zone stocks .STOXXE reached their highest in a decade. Germany's DAX .GDAXI jumped more than 0.9 percent at the open and touched a record 13,596 points.

The DAX has posted gains in the Friday session. Currently, the DAX is at 13,481.00, up 0.30% since the close on Thursday. There are no eurozone indicators on Friday.

The US releases key employment numbers, led by nonfarm payrolls. The indicator is expected to soar to 311 thousand in October, after a decline a month earlier. However, wage growth could be in trouble, as Average Hourly Earnings is forecast to slow to 0.2 percent.

 No change is expected in the unemployment rate, with an estimate of a sizzling 4.2 percent. As well, the US releases ISM Non-Manufacturing PMI, which is expected to drop to 58.5 points.

The DAX posted strong gains this week, in response to the release of positive corporate earnings. Automobile sector posted strong gains, led by BMW, Daimler and Volkswagen. The DAX set another record high on Friday, and the index has been red hot, jumping 9.6 percent since early September.

The robust German economy has helped boost German stock markets, and with the economy expected to record a strong fourth quarter, the DAX rally could continue.

German numbers looked sharp this week, as the largest economy in the eurozone continues to perform well in 2017. Manufacturing PMI remained steady at 60.6, its highest level since April 2011.

The German labor market continues to impress, as unemployment rolls declined for a third straight month in October. Unemployment has now dropped in all but two readings since June 2015.

After an excellent GDP report last week, the US economy faces another report card on Friday. The US releases nonfarm payrolls and wage growth, and the readings could affect global stock markets.

Nonfarm payrolls posted a rare decline in September, a result of the hurricanes which battered the US. The markets are expecting job growth to surge in October, with an estimate of 311 thousand.

However, wage growth could weigh on the markets, as Average Hourly Earnings is forecast to slow to 0.2 percent.

Results drive sharp moves in European stocks

European Stock Markets

European share trading got off to a hesitant start on Thursday as concerns over protectionism and a bond market sell-off made the breakneck New Year rally in equities fizzle out.

Results drove the bulk of stock moves, with some disappointments weighing heavily.

The pan-European STOXX 600 and euro zone equities .STOXXE dipped 0.1 percent, recovering from sharp losses in the previous session when jitters over a report that China was considering slowing purchases of U.S. Treasury bonds spilled over into stocks.

A Chinese regulator on Thursday said the report may be “fake”.

Britain's FTSE 100 .FTSE meanwhile touched a fresh record, its third in as many days, before falling back to trade down 0.1 percent.

UK retailers Tesco (TSCO.L) and Marks & Spencer (MKS.L) were among the biggest European fallers after their Christmas trading updates disappointed, with consumers cutting down on non-essential items.

Europe’s retail sector .SXRP was the worst-performing, down 0.8 percent as a result, while bank stocks .SX7P, which had jumped on Wednesday as bond yields surged, fell back 0.3 percent.

Danish jewellery firm Pandora (PNDORA.CO) dropped to the bottom of the STOXX, down 13 percent after the company said it expected profit margins to fall in the next few years and reported 2017 revenue below expectations.

Hexagon (HEXAb.ST) jumped up 4.2 percent, after its CEO was cleared of insider trading charges.
While it was too early in the season to fully determine what impact results were having, investors said earnings would be under particular scrutiny this year as the market hoped for another year of earnings growth.

In other big moves, the restructuring French telecoms and cable firm Altice (ATCA.AS) tumbled 5.8 percent, extending Wednesday’s slide, after its U.S. unit announced a $500 million junk bond sale.

Chipmaker STMicro (STM.MI) gained 3.2 percent after Credit Suisse upgraded the stock to ‘outperform’, saying margins for the iPhone supplier would continue to expand.

Sodexo (EXHO.PA) also fell victim to disappointing results, its shares down 3 percent after the firm reported a slow start to its first quarter.

FTSE hovers, set for a weekly gain despite financials dragging

Britain’s major stock index steadied on Friday at the end of a busy week of central bank meetings, with financials sagging again while BT was boosted by a deal with Sky.

The FTSE 100 inched around 0.1 percent lower in line with mid- and small-cap indices. The leading companies index was set for a small gain on the week, having hit its highest level in a month on Wednesday.

Financials weighed heaviest, continuing their slide from the previous session as investors’ building enthusiasm around bank stocks - expected to gain from U.S. tax reform and rising interest rates - dissipated.

HSBC, Standard Chartered and Barclays fell 0.6, 0.9 and 1.4 percent, the top drags to the FTSE 100.
BT rose 1.1 percent after striking a deal with Sky to carry each other’s channels.

Domestic stocks were a touch weaker, as investors awaited the fallout from the second day of the EU summit.

Overall on the FTSE 100, analysts have persistently been revising earnings expectations lower. 

Euro zone businesses to start 2018 on near seven-year high

Businesses across the euro zone are ending 2017 on a near seven-year high, with demand and price pressures picking up and forward-looking indicators pointing to a busy start to 2018. 

The results of a key private sector survey on Thursday were better than economists polled by Reuters expected, with factories marking their best month in the survey’s two-decade history while services activity also accelerated.

December’s upbeat numbers come the month before the European Central Bank is set to cut in half its monthly asset purchases to 30 billion euros (£26.4 billion). The ECB meets later today and is likely to bump up some economic forecasts.

Despite a decade of ultra-loose policy, the ECB has failed to get inflation up to its target of just under 2 percent. So evidence in the latest survey of continuing price pressures, although a bit weaker than in November, will be welcomed.

The euro zone economy as a whole likely expanded 0.8 percent this quarter, IHS Markit said. If correct, that would be the strongest official quarterly growth rate since early 2015. 

European shares steady as tech-financials rotation continues

European shares see-sawed on Tuesday with sectors strongly diverging as a rotation from tech stocks into financials, bolstered by the U.S. tax bill, gathered pace.

Eurozone blue chips, fresh from their best day in five months, held steady, while the broader euro zone index edged up 0.1 percent as strength in banking and consumer stocks outweighed weak tech and mining sectors. 

Germany’s industrials and autos-heavy DAX outperformed peers, up 0.1 percent, while Italy’s FTSE MIB was buoyed by banks Intesa Sanpaolo and Unicredit .

Euro zone banks maintained positive momentum after their best gains in two months on Monday, up 0.3 percent. Societe Generale and BNP Paribas were among the biggest boosts to France’s CAC 40.

Following the pattern in Wall Street and Asian trading overnight, chipmakers led the tech sector down as investors switched from highly valued tech stocks into financials. 

Retailers were set for a rare positive day, the best-performing sector after Goldman Sachs upgraded UK supermarket Tesco to a “buy”, boosting its shares by 3 percent.

Provident Financial sank 15 percent in early deals after UK regulator FCA opened an investigation into its Moneybarn unit.

Euro climbs to session highs against dollar after upbeat German data

European Stock Markets

A round of strong German regional inflation readings that bolstered expectations for a rebound in the country’s consumer price growth has sent the euro climbing to session highs in mid-morning action in Europe

 The common currency was recently up 0.37 per cent at $1.1883 just after a batch of inflation data. It has since eased back to $1.1867.

A series of reports by Germany’s Federal Statistics Office showed that the year on year pace of price growth in four states picked up steam in November. That has sharpened expectations for a pick up in the overall inflation rate in Germany, the eurozone’s biggest economy, after a disappointment in October.

The euro has climbed 2 per cent on the buck this month, bringing its gains this year to 12.8 per cent, according to FactSet data. Investors have grown increasingly bullish on the shared currency thanks to the improvement in the bloc’s economy. In fact, bullish bets by US derivatives traders — seen as a proxy for the $5tn a day global currencies market — have come within 4 per cent of three-year highs, according to an analysis by Société Général

The weakness of the dollar this year has come as a surprise to many Wall Street investment houses, which came into the year expecting Federal Reserve rate rises would provide the world’s reserve currency with a tailwind.

 But political upheaval in Washington, coupled with persistently tepid inflation readings in the US, has kept pressure on bond yields.

The spread between 10-year Treasuries and German Bunds of the same maturity, an important factor for currencies traders, has actually fallen from 2.19 percentage points at the start of 2017 to 1.97 percentage points today.

Stocks set for first week of gains in three, euro climbs

European Stock Markets

World stocks hovered below record highs on Friday, set to reverse two straight weeks of losses while the euro hit its highest levels in six weeks following stronger than expected economic data this week. 

The MSCI World Index, which tracks shares in 47 countries, was up 0.1 percent, set for a 1 percent gain this week. Its climb was underpinned by modest gains in Europe and Asia. 

Emerging stocks .MSCIEF were up 0.2 percent and the pan-European STOXX 600 was up 0.1 percent. .STOXX50

Surveys on Thursday covering Europe’s services and manufacturing industries outshone the most optimistic forecasts in Reuters polls, with factories having the second-best month in the index’s history.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.2 percent, as Hong Kong shares .HSI bucked the softness in mainland Chinese shares to gain 0.6 percent.
Stocks in mainland China dropped to three-month lows after big falls the previous day on concerns about fresh government steps to curb financial risks and rise in Chinese bond yields.

Japan's Nikkei .N225 ended up 0.1 percent after a market holiday on Thursday while U.S. stock futures ESc1 were little changed after shortened trading on Thursday.

In the currency market, the U.S. dollar remained under pressure after the minutes from the U.S. 

Federal Reserve’s latest policy meeting highlighted concern among some of the board members over persistently low inflation. The index that measures the greenback against a basket of peers was 0.2 percent lower. .DXY

The euro EUR= hit its highest in nearly two months at $1.1875 and was on track to mark its third consecutive week of gains despite failure of coalition talks in Germany earlier this week.

The leader of country’s Social Democrats is coming under growing pressure to drop his opposition to a new “grand coalition” with Chancellor Angela Merkel’s conservatives, with senior politicians arguing the party had a duty to promote stability.

A weaker dollar saw the British pound staying near a six-week high against the dollar ahead of British Prime Minister Theresa May’s visit to Brussels later in the day for talk on Brexit.[GBP/]

Commentary: Long the laggards, Italy and France drive "la Euroboom"

Germany and Spain have been the drivers of euro zone growth over the last couple of years, but it’s France and Italy steering the “Euroboom” into 2018.

Fred Ducrozet at Pictet Asset Management notes that the latest leg of this “robust and broad-based” recovery has been increasingly driven by laggard countries “catching up with the rest of the pack.”

He’s crunched the numbers and unsurprisingly finds that Italy is punching well below its weight. 

Based on end-2016 figures, Italy accounts for 15.5 percent of total euro zone economic output. But it has accounted for only 4.2 percent of cumulative growth since the euro’s inception in 1999, almost four times lower than its weighting. 

Yet since Q2 2013, Italy’s cumulative contribution to overall euro zone growth stands at 7.5 percent, according to Ducrozet. If you start at Q1 last year, that rises to 9.6 percent. 

Based on end-2016 figures, France’s share of the euro zone economy is 20.6 percent. Since 1999 France’s contribution to euro zone growth has been almost exactly the same as its weighting, at 21.1 percent. 

That falls sharply to 13.0 percent when using Q2 2013 as the starting point, reflecting just how hard France’s economy was hit by the 2008 global financial and 2011-12 euro zone debt crises. But since Q1 last year, that has risen to 14.2 percent.

Ducrozet’s analysis shows that both countries are moving in the right direction, albeit slowly. Even though they’re both coming up from a low base, they’re narrowing the gap between actual and potential growth. 

Erik Nielsen at Unicredit notes that, contrary to perceived wisdom, Italy’s low trend growth rate of 1-1.5 percent is sufficient to keep the country comfortably servicing its large debt load of around 130 percent of GDP.

Euro trapped in narrowing ranges as data eyed

European Stock Markets

The euro slipped on Tuesday but stayed within recent trading ranges, as recent economic data surpassed market expectations, making investors wary of pushing the single currency lower. 

Investor sentiment towards Germany climbed to a record high, Monday’s data showed, as the euro zone’s largest economy fuelled a brisk economic recovery in the region, and region-wide growth was robust in October, according to a survey.

 

The euro edged 0.2 percent lower to $1.1591 in early trades. Trading ranges in the single currency have become narrower since the European Central Bank said on Oct. 26 it was cutting back its monthly bond purchases, with the euro remaining in a half percent daily trading range against the dollar

However, in the general risk-on environment emerging-market currencies saw some flows as carry trades regained favour. The Brazilian real rose 2 percent on Monday, its biggest-single-day rise in nearly six months, and the Indonesia rupiah pushed higher.

The dollar index gained against a basket of six major currencies to 94.913, nearing a 10-day peak of 95.077 reached on Monday.

The dollar had been solid after strong U.S. services and factory data released before the weekend backed expectations that the Federal Reserve will raise interest rates next month and tighten further in 2018. 

Australia’s central bank on Tuesday left its cash rate at a record-low 1.5 percent, and it looked likely to remain sidelined for months, with inflation low and debt-laden consumers cautious. The Australian dollar was little changed at $0.7665 after gaining about 0.5 percent on Monday against a stronger U.S. dollar.

EU ends Greece's deficit procedure in positive signal to markets

European Union states decided on Monday to close disciplinary procedures against Greece over its excessive deficit after improvements in Greece’s fiscal position, confirming the country’s recovery is on the right track. 

The move, although largely symbolic, sends a new signal that Greece’s public finances are again under control, facilitating the country’s plans to tap markets after a successful issue of bonds in July which ended a three-year exile. 

EU fiscal rules oblige member states to keep their budget deficits below 3 percent of their economic output or face sanctions that could entail hefty fines, although so far no country has received a financial penalty. 

Greece had a 0.7 percent budget surplus in 2016, and is projected to maintain its fiscal position within EU rules’ limits this year. 

“In the light of this, the Council (of EU states) found that Greece fulfils the conditions for closing the excessive deficit procedure,” the EU said in a note. 

“After many years of severe difficulties, Greece’s finances are in much better shape. Today’s decision is therefore welcome”, Estonia’s finance minister Toomas Toniste said. 

The EU states’ decision confirmed a proposal by the EU executive commission in July to end the disciplinary procedure for Greece.

But he stressed that Greece still needs to positively exit its bailout programme which ends in August after a third review of the country’s reforms by international creditors.