Yen falls as risk appetite rebounds before central bank meetings

12 Septembre, 2019, 10:10 | Auteur: Auguste Feret
  • European stocks closed lower as London lags; financials feather

U.S. Treasury yields rose for a third day, tracking those in the euro zone bond market, as investors were unsure about the stimulus measures the ECB will engage in, with a late report on Tuesday the central bank may delay quantitative easing adding to the uncertainty.

Expectations for a 25-basis-point cut by the Fed at its next meeting stand at 88.8%, according to CME's FedWatch, down from 92.3% on Tuesday.

However, concern has been mounting that ECB policymakers and other global central banks are nearing the limits of stimulus policies, especially those with negative interest rates and sub-zero long-term sovereign bond yields.

Elsewhere, investor focus for now is centered on the European Central Bank meeting on Thursday.

Europe's largest economy is teetering on the brink of recession, but strict national spending rules have tied policymakers hands on fiscal policy.

"Does that work in a super low interest rate world and in a very integrated world?" when central banks might have misplaced a lot of their conventional affect over the home economic system.

The US Federal Reserve is also widely expected to cut interest rates next week as policymakers race to shield the global economy from risks, which also include Britain's planned exit from the European Union.

Indian stocks markets are likely to be firm on Thursday following stability in global peers.

Data showing China's mainland factory-gate prices shrank at their fastest pace in three years, as flagging demand at home and overseas forced some businesses to slash prices, saw Asian bourses slip lower.

Meanwhile, the regional Pan-European index STOXX 600 wrapped up the day 0.3 percent down after rising as much as 0.2 per cent earlier in the session over hopes of stimulus from ECB (European Central Bank) later this week and an unprecedented upsurge of German exports.

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"We really thought monetary policy had things under control", and would be able to offset whatever programs elected leaders chose to pursue, even a trade war, said Tara Sinclair, an economics professor at George Washington University.

"While the enormous slide in China factory gate prices reminded us of what we already know, U.S. tariffs are sinking the Chinese economy and at a much quicker pace than anyone could have imagined".

The export-heavy German index was also aided by a Reuters report that Bank of Japan policymakers are now more open to discussing the possibility of expanding stimulus at their September 18-19 board meeting due to the broadening fallout of the U.S.

However, climbing bond yields helped lift European banking stocks 0.3% - one of the few sectors in the black.

On Wall Street, stocks were lower, weighed down in part by technology .SPLRCT shares as data from China showing producer prices had their sharpest pace of declines in three years in August renewed global recession worries.

The dollar briefly rose to a six-week high of 108.11 yen before paring gains slightly to trade up 0.17 per cent at 108.04 yen.

Broader risk appetite fed through into gains for both the Australian and New Zealand dollars, which were up 0.1% each.

The 10-year yield hit a high of 1.752%, its highest level in just over a month.

United States crude traded at $58.43 a barrel after hitting the highest since July 31.

USA crude fell 2.56% to $55.93 per barrel and Brent was last at $60.94, down 2.31% on the day.

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