European stocks steady as US celebrates 4th of July

04 Jul, 2019

"European stocks have edged a tad higher while US stock futures are unchanged following Asia's mixed session, one day after new record highs for indexes stateside," said Oanda analyst Dean Popplewell.

"Trading remains thin due to July 4th US celebrations," he added but sounded caution before Friday's data release of US non-farm payrolls -- a key update on the health of the world's biggest economy.

- 'Vulnerable' dollar -

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"Currently, the dollar trades broadly flat due to the US public holiday but could be vulnerable and ruin traders' weekends if tomorrow's US NFP data comes in on the weaker side."

Asian equity markets experienced mixed fortunes, despite a record-breaking performance on Wall Street, as investors turned their focus to Friday's upcoming data while hoping for a big Federal Reserve interest rate cut.

US traders went on a pre-July 4 spending spree Wednesday to push all three main indexes to their all-time highs as a string of weak economic indicators reinforced the case for the Fed to reduce borrowing costs.

With the relief rally from Donald Trump and Xi Jinping's trade war ceasefire running its course, dealers were turning their attention to the global outlook and pinning their hopes on central bank support.

The release Friday of US non-farm payroll figures is key, analysts say, with a weak reading likely to reinforce expectations of a rate cut.

Talk of a reduction and concerns about the economy have seen the yield on safe haven 10-year Treasuries fall below two percent.

- French negative yield -

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Stephen Innes, at Vanguard Markets, said the fall in yields across several asset classes "has increased investor appetite for high dividend-yielding equity risk".

In Europe meanwhile, the French Treasury issued 10-year bonds at negative interest rates for the first time ever, meaning investors are now willing to pay, rather than receive, interest on their bond purchases.

Dealers attributed part of the rally in eurozone bond markets to the nomination of IMF chief Christine Lagarde as head of the ECB where she would be expected to pursue loose money policies.

"With increasingly dovish central bank rhetoric throughout Europe and the US, further gains look likely," predicted Joshua Mahony, senior market analyst at IG.

The increasing likelihood of a Fed cut has, however, weighed on the dollar, with riskier currencies such as the South Korean won, Australian dollar and Indonesian rupiah all strengthening.

However, Trump hit out at China on Wednesday in a Twitter rant, accusing it and Europe of artificially keeping the yuan and euro weak to gain an advantage over the US.

He said they were playing a "big currency manipulation game" and "pumping money into their system", adding that the US should step up to the fight by matching them.

Oil prices meanwhile sagged, with traders disappointed by the size of the drop in US stockpiles of the commodity, while worries over the global economic outlook weigh on demand expectations.

 

- Key figures around 1540 GMT -

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London - FTSE 100: DOWN 0.1 percent at 7,603.58 points (close)

Paris - CAC 40: FLAT at 5,620.73 (close)

Frankfurt - DAX 30: UP 0.1 percent at 12,629.90 (close)

EURO STOXX 50: UP 0.1 percent at 3,544.15

Tokyo - Nikkei 225: UP 0.3 percent at 21,702.45 (close)

Hong Kong - Hang Seng: DOWN 0.2 percent at 28,795.77 (close)

Shanghai - Composite: DOWN 0.3 percent at 3,005.25 (close)

New York - Closed for national holiday

Euro/dollar: UP at $1.1282 fom $1.1278 at 2100 GMT

Dollar/yen: DOWN at 107.80 yen from 107.81

Pound/dollar: UP at $1.2580 from $1.257

Brent North Sea crude: DOWN 24 cents at $63.58 per barrel

West Texas Intermediate: DOWN 32 cents at $57.02

Copyright AFP (Agence France-Press), 2019
 

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