LONDON, March 7 — World stocks were stuck in their worst run of the year and bonds were on the rise today, as investors waited for confirmation that the European Central Bank will start shovelling cheap cash at the euro zone again.
The ECB was holding its second meeting of the year, and with the euro almost motionless and stocks suffering from the same growth nerves that will see the central bank chop its in-house forecasts later, markets were poised.
European shares retreated further from five-month highs as MSCI’s 47-country world share index also dropped for a fourth straight session to set its longest losing streak since December’s rout.
Italy’s government bonds rallied to a 7-month high while its banks, which used the biggest share of the previous round of cheap central bank loans, rose 0.1 per cent but remained below the highs hit in the previous session.
A return to what was once its flagship crisis-fighting tool would be a wrenching change of direction for the ECB just months after it wound down its €2.6 trillion (RM12 trillion) QE programme,
But Head of investments at UK fund manager Hermes, Eoin Murray, said he wondered how much impact such measures, or even more US Fed stimulus, would have, considering the potency has tended to wane with every new round in recent years.
“I just don’t think it will have the power to get the economy to the point of takeoff,” Murray said.
Europe’s subdued mood came after Asia and Wall Street had also both stumbled overnight.
MSCI’s broadest index of Asia-Pacific shares outside Japan edged 0.3 per cent lower today, yet hovering not far from its five-month high marked last week, and was up 10 per cent year-to-date.
Japan’s Nikkei average fell 0.7 per cent, while Hong Kong’s Hang Seng shed 0.7 per cent and Chinese blue-chips snapped a four-day winning streak as the boost from new stimulus plans there ran into the sand.
Wall Street’s main indexes had fallen for a third straight session, with the S&P 500 posting its biggest one-day decline in a month, as investors sought reasons to buy after a near 20 per cent rally since the start the year.
“For some time, markets had been pricing in good news, namely that the talks between the US and China will likely go well,” said Tatsushi Maeno, senior strategist at Okasan Asset Management. “Now markets are having a pause.”
Adding to concerns about the talks was data that showed the US goods trade deficit surged to a record high in 2018 as strong domestic demand pulled in imports, despite the Trump administration’s “America First” policies aimed at shrinking the gap.
Other US data out on Wednesday suggested some slowing in the labour market, though the pace of job gains remains more than enough to drive the unemployment rate down.
The ADP National Employment Report showed private payrolls increased by 183,000 in February after surging 300,000 in January. Economists polled by Reuters had forecast private payrolls advancing 189,000 in February.
The government’s more comprehensive “non-farm” payrolls employment report for February is scheduled for release on Friday.
Time to TLRTO?
In the currency market, the euro traded at US$1.1304, hovering near a two-week low ahead of the ECB and its expected news on its cheap long-term loans for banks, known more formally as Targeted Long-Term Refinancing Operations (TLTROs).
The dollar was little changed at 111.74 yen, moving away from Tuesday’s 2-1/2-month peak of 112.135, while the dollar index, which measures the greenback against a basket of six of its peers, barely moved at 96.887.
The Canadian and Australian dollar sank to two-month lows on Wednesday as traders scaled back holdings on expectations policy-makers would leave interest rates alone in the foreseeable future or even lower them to counter their softening economies.
Adding to the Aussie’s woes on Thursday was data showing local retailers suffered another bleak month in January, in a sign overall economic momentum was slowing. The Aussie dollar last changed hands at US$0.7042, up 0.1 per cent on the day.
Brexit uncertainty kept the pound below an eight-month high hit last week as investors waited for some clarity to emerge out of negotiations between Britain and the European Union.
Diplomats said talks in Brussels on Tuesday led by British Prime Minister Theresa May’s chief lawyer, Geoffrey Cox, failed to find common ground, with three weeks to go before Britain’s scheduled departure on March 29.
“Markets are getting conflicting signals from lawmakers in Britain and the negative news flow from Brussels on the negotiation process, and that is keeping the pound in a tight range,” said Nikolay Markov, a senior economist at Pictet Asset Management.
Among commodities, oil edged up amid ongoing OPEC-led supply cuts and US sanctions against exporters Venezuela and Iran, although prices were prevented from rising further by record US crude output and rising commercial fuel inventories.
US crude futures rose 0.1 per cent to US$56.29 per barrel, moving closer to its 3-1/2-month high of US$57.88 (RM236) touched Friday, while international benchmark Brent futures gained 0.3 per cent to US$66.20 per barrel. — Reuters