Posts Tagged ‘currencies’

Investors Get a Reprieve From Recent Turmoil

February 12, 2018

Stocks Bounce Back With S&P Futures; Dollar Falls: Markets Wrap

 Updated on 
  • Won jumps as Kim Jong Un invites South Korea’s Moon for talks
  • Investor focus turns to U.S. CPI, as volatility index eases
Kleinwort Hambros’ CIO Says Opportunities Will Arise From This Market
Kleinwort Hambros’ CIO says opportunities will arise from this market.

Investors got a reprieve from the rout in stocks and the worst volatility spike since 2015, with equities rising in Europe and Asia. S&P 500 futures rose, while the dollar and Treasuries fell amid concern President Donald Trump’s budget proposal will drop his party’s goal to balance the budget in 10 years.

The Stocks Europe 600 index climbed, led by miners and chemical makers. South Korean equities rose after President Moon Jae-in was invited by North Korean leader Kim Jong Un to meet. The dollar’s decline supported commodities, with metals higher and crude oil halting a six-day selloff. Japan’s markets are closed for a holiday.

Traders however remained on edge following tumultuous moves in equities last week, which saw the S&P 500 post its worst week in two years with a 5.2 percent decline on fears over interest rate hikes. The Cboe Volatility Index dropped on Monday after an almost three-fold jump since late January week when the turbulence erupted.

Investors are awaiting U.S. consumer-price data on Wednesday with some trepidation. Pressure on equities has been emanating from the Treasury market and in the outlook for inflation. Ten-year Treasury yields climbed on Monday, touching a fresh four-year high amid concern the Federal Reserve may accelerate its rate-hike schedule.

Asian stocks were buoyed by the attempts to thaw the tensions on the Korean Peninsula. Vice President Mike Pence told the Washington Post the U.S. is ready to engage in talks about North Korea’s nuclear program, signaling a shift in policy. The won outperformed major currencies.

Terminal users can read more in our markets blog.

Here are some important things to watch out for this week:

  • Trump will deliver his 2019 budget blueprint on Monday.
  • Chinese New Year celebrations for the Year of the Dog begin in China and follow across much of Asia, including Hong Kong, Taiwan, Singapore, Malaysia and Indonesia. Chinese mainland markets are closed Feb. 15-21.
  • South African President Jacob Zuma’s fate is set to be sealed on Monday when the top leadership of the ruling African National Congress meets to conclude the transition to a new administration.
  • The U.S. consumer-price index, due Wednesday, probably increased at a moderate pace in January, economists project. Retail sales in the U.S., also out Wednesday, probably increased for a fifth straight month.
  • Japan is expected to extend the longest stretch of economic growth since the mid-1990s when it reports fourth-quarter gross domestic product on Wednesday.
  • Earnings season continues in full swing with reports from Bunge, TripAdvisor, SunPower, Con Edison, Bombardier, Heineken, Loews, Michelin, PepsiCo, MetLife,Cisco, Japan Post Bank, Credit Suisse, Nestle, Airbus, Allianz, Telstra, Coca-Cola, Deere, Eni, Credit Agricole and Campbell Soup.

These are the main moves in markets:

Stocks

  • The Stoxx Europe 600 Index climbed 1.3 percent as of 9:15 a.m. London time.
  • The MSCI All-Country World Index jumped 0.5 percent, the largest increase in more than two weeks.
  • Futures on the S&P 500 Index rose 1.2 percent.
  • The U.K.’s FTSE 100 Index gained 1.2 percent.

Currencies

  • The Bloomberg Dollar Spot Index dipped 0.2 percent, the largest decrease in more than a week.
  • The euro gained 0.2 percent to $1.2274, the biggest climb in more than a week.
  • The British pound increased 0.3 percent to $1.3862, the largest climb in more than a week.
  • South Africa’s rand increased 0.1 percent to 11.9764 per dollar.

Bonds

  • The yield on 10-year Treasuries rose four basis points to 2.89 percent, the highest in more than four years.
  • Germany’s 10-year yield increased three basis points to 0.78 percent, the highest in more than two years.
  • Britain’s 10-year yield gained four basis points to 1.605 percent.

Commodities

  • West Texas Intermediate crude surged 2.4 percent to $60.65 a barrel, the first advance in more than a week and the biggest jump in almost seven weeks.
  • Gold rose 0.3 percent to $1,321.23 an ounce, the largest advance in a week.
  • LME copper gained 1.4 percent to $6,850.00 per metric ton, the first advance in a week.

https://www.bloomberg.com/news/articles/2018-02-11/traders-brace-for-more-turmoil-after-recent-rout-markets-wrap

— With assistance by Elena Popina, Ruth Carson, and Andreea Papuc

Advertisements

Europe Stocks Gain as U.S. Futures Drop; Oil Rises: Markets Wrap

February 7, 2018

Bloomberg

By Adam Haigh and Samuel Potter

 — Updated on 
  • Treasury yields decline after spike on Tuesday; dollar steady
  • Gold rises after slide yesterday; EM shares flat after rout
 “People are looking at this as partially a buying opportunity,” says Goldman Sachs Co-President Harvey Schwartz.
.
Video:
Goldman Sachs’ Schwartz Says Volatility May Be Catalyst for M&A
 Image result for Goldman Sachs Co-President Harvey Schwartz, photos

The rebound in stock prices spread to Europe, but markets remained on edge as Asian equities pared their advance while U.S. futures retreated. Treasuries rebounded after Tuesday’s slump, gold climbed and crude advanced.

The Stoxx Europe 600 Index headed for the first increase in eight days as most sectors on the gauge rose. Earlier in Asia, Japan’s benchmarks eked out slim gains at the close after retreating from the session’s highs, while Chinese shares dropped. The dollar was flat as most commodities rallied.

Markets from Europe to Japan tumbled into oversold territory after the rout of the past week, which was triggered by rising bond yields and the prospects for a return of inflation and subsequent tighter monetary policy. Amid a slew of calls to “buy the dip,” investors will be watching Wednesday’s auction of 10-year Treasuries for clues on where markets go from here.

Elsewhere, oil rose after three days of declines as an industry report showed an unexpected decline in U.S. crude stockpiles. And Bitcoin traded little changed at around $7,700.

Here are some key events scheduled for this week:

  • Monetary policy decisions are due this week in Russia, Brazil, Poland, Romania, the U.K., New Zealand, Serbia, Peru and the Philippines.
  • Earnings season continues with reports from Philip Morris, Tesla, Rio Tinto, L’Oreal Rio Tinto and Twitter.
  • New York Fed President William Dudley and Dallas Fed President Robert Kaplan are among policy officials due to speak.

Terminal users can read more in our markets blog.

These are the main moves in markets:

Stocks

  • The Stoxx Europe 600 Index increased 0.4 percent as of 8:23 a.m. London time, the first advance in more than a week.
  • Futures on the S&P 500 Index sank 1.1 percent.
  • The MSCI Asia Pacific Index increased 0.2 percent, the largest climb in more than a week.
  • The U.K.’s FTSE 100 Index gained 0.6 percent, the first advance in more than a week.
  • The MSCI Emerging Market Index advanced less than 0.05 percent, the first advance in a week.

Currencies

  • The Bloomberg Dollar Spot Index decreased less than 0.05 percent.
  • The euro fell less than 0.05 percent to $1.2372.
  • The British pound dipped 0.1 percent to $1.3931, the weakest in almost three weeks.
  • The Japanese yen gained 0.6 percent to 108.96 per dollar, the strongest in more than a week.
  • South Africa’s rand declined 0.2 percent to 11.9431 per dollar.
  • The MSCI Emerging Markets Currency Index rose 0.4 percent.

Bonds

  • The yield on 10-year Treasuries dipped four basis points to 2.76 percent.
  • Germany’s 10-year yield climbed one basis point to 0.70 percent.
  • Britain’s 10-year yield advanced less than one basis point to 1.523 percent.

Commodities

  • West Texas Intermediate crude climbed 0.4 percent to $63.65 a barrel.
  • Gold climbed 0.5 percent to $1,330.74 an ounce.

https://www.bloomberg.com/news/articles/2018-02-06/stocks-in-asia-face-rally-as-u-s-equities-recover-markets-wrap

Making the Dollar Weak Again — The one-two punch of protectionism and devaluation

January 25, 2018

Mnuchin and Trump want to reduce U.S. purchasing power.

Steven Mnuchin, U.S. Treasury secretary, speaks during an Economic Club of Washington conversation in Washington, Jan. 12.
Steven Mnuchin, U.S. Treasury secretary, speaks during an Economic Club of Washington conversation in Washington, Jan. 12. PHOTO:ANDREW HARRER/BLOOMBERG NEWS

The Trump Administration contains dueling economic impulses good and bad, and this week we’ve seen the bad. First President Trump imposes tariffs on solar cells and washing machines, and a day later Treasury Secretary Steven Mnuchin decides to talk down the dollar.

“A weaker dollar is good for trade,” Mr. Mnuchin said from Davos, Switzerland on Wednesday, and the greenback promptly tumbled to a three-year low against a basket of other currencies. The one-two punch of protectionism and devaluation also sparked a rally in gold to its highest level since August 2016.

What a spectacle: The man whose signature is on the greenback tells the world he wants its value to be lower so the U.S. can beggar its neighbors on trade. Mr. Trump has also said he favors a weak currency, and the buck has fallen some 8% in his first year.

The Sinking DollarDollar vs. the Euro, Nov. 1, 2017-Jan. 24, 2018Source: WSJ Market Data Group
Nov. ’17Dec.Jan. ’180.800.810.820.830.840.850.860.87

Someone ought to tell these fellows the history of strong- and weak-dollar presidencies. The weak include Jimmy Carter, Richard Nixon and George W. Bush. The strong include Ronald Reagan and Bill Clinton. Perhaps Mr. Mnuchin aims to follow Michael Blumenthal, who held the Treasury job in the Carter Administration. His weak-dollar lobbying, along with an easy money policy at the Federal Reserve, led to a collapse of the dollar of more than 20% between January 1977 and October 1978 that fed higher inflation and elected Reagan.

Britain has repeated the experiment since it voted to exit the European Union in June 2016 and the central bank responded to economic weakness by cutting interest rates and more quantitative easing. By October the pound had reached a 31-year low. Inflation rose and wages stagnated, contributing to the Tory election embarrassment last year.

A weak dollar makes the U.S. worse off because Americans don’t live in an economic bubble. They buy from abroad because other countries make things Americans want or need. U.S. manufacturers import components to produce value-added goods like machinery and aircraft that are exported. Dollar devaluation makes those imports more expensive, which undermines competitiveness vis-a-vis foreign rivals. Commodities like oil and copper are traded in dollars so a weak dollar requires more of them. This is good for dictators in places like Venezuela. For Americans, not so much.

Devaluation can make the trade deficit look better for a time and there is often a short-term gain for corporate income statements. But it’s ultimately a fool’s game because the underlying terms of trade don’t change. Companies and prices adjust and, in David Ricardo’s classic formulation, one bottle of wine still equals 10 loaves of bread.

Mr. Mnuchin’s comments are all the more baffling because he and the Administration should be riding high. The U.S. is growing faster than it has in 12 years as deregulation and tax reform boost business and consumer confidence. Capital that was sidelined during the Obama years is being put to work. Unemployment is at historic lows. Why mess it up by imitating the economic policy of Argentina?

Appeared in the January 25, 2018, print edition.

Related:

Dollar Gets the Cold Shoulder in Global Economic Boom

January 14, 2018

Investors are flocking to the yen, euro and other currencies amid promise of quickening growth overseas

The dollar decline is the latest reversal for many investors who expected the currency to rise as the Federal Reserve continues on a yearslong path of gradual interest-rate increases.

The promise of accelerating economic growth overseas is propelling investor funds into the yen, euro and many emerging-market currencies, intensifying a yearlong siege on the U.S. dollar.

The ICE Dollar Index hit its lowest level in more than three years on Friday, extending a nearly 10% decline last year that marked the dollar’s steepest annual fall since 2003. The index tracks the value of the currency vs. a basket of U.S. trading partners.

Investors point to the global economic upswing of recent months and the tentative, accompanying steps by central bankers in Europe and Japan to normalize monetary policy after years of expansive support. While the European Central Bank and the Bank of Japan continue to supply generous support to markets, expectations are building that the world’s biggest economies will soon unwind nearly a decade of postcrisis stimulus measures and eventually join the Federal Reserve in raising interest rates.

That potentially makes the dollar less appealing to investors, who for years piled into U.S. assets anticipating steady growth and accepting low yet still above-market yields. While the Dow industrials have surged to records alongside many global stock markets, major U.S. indexes have lagged behind foreign counterparts in recent months, a sign that markets here have become something of an afterthought following large gains earlier in the decade.

“The dollar narrative is one of a global regime shift,” said Mark McCormick,  North American head of FX strategy at TD Securities. Economies like Europe and Japan “are actually starting to look like places where you would want to invest.”

The dollar decline is the latest reversal for many investors who expected the currency to rise as the Fed continues on a yearslong path of gradual interest-rate increases. Recently, the dollar’s decline has been slow and steady, but the currency’s failure to tick up when news might seem to point toward a faster pace of Fed rate increases or an uptick in inflation has impressed itself upon some investors.

Two recent examples stand out. Robust U.S. consumer-price data on Friday didn’t spur a dollar rally, and rising Treasury yields in recent weeks have had no appreciable effect on the currency, even as they have reignited a longstanding market debate about whether interest rates will eventually return to precrisis levels.

“You are seeing all these positives that should be causing the dollar to strengthen having virtually no effect,” said Said Haidar, head of Haidar Capital Management, which oversees $388 million.

Mr. Haidar is betting that the dollar will decline against the currencies of commodity-producing emerging markets such as Malaysia, Chile and Colombia.

Many analysts believe the dollar’s decline in 2018 is likely to be accelerated by the passage of the U.S. tax bill, which is widely expected to expand the U.S. fiscal deficit. The dollar tends to fall when the deficit expands, reflecting in part the rising need for the nation to sell bonds to close its funding gap.

Goldman Sachs and J.P. Morgan expect U.S. fiscal deficits to rise to $1 trillion, or 5% of GDP, in 2019 from $664 billion in the 2017 fiscal year ended September, or around 3.4% of GDP.

In part, the recent dollar weakness merely reflects the normal wax and wane of market forces.The dollar has rallied nearly 25% against its peers from its lows of 2011, a gain that in the eyes of many analysts has made the U.S. currency more expensive than its underlying fundamentals would dictate.

A modest further decline in the dollar would be welcomed by many large U.S. companies that report substantial earnings overseas. A falling dollar tends to boost exports by making U.S. goods more competitive abroad, a key policy objective of President Donald Trump, and a weaker currency potentially also gives the Federal Reserve more room to raise interest rates.

But some investors worry that an extended drop in the dollar could shake faith in the U.S. economy, elevating concerns about the lofty stock-market valuations and complicating the Fed’s efforts to raise rates. A rapid drop could also spur fears that inflation will rise beyond the moderate pace hoped for by policy makers and investors.

Net bets against the dollar in futures markets shrank to their lowest level in more than a month in December, due in part to expectations that companies will take advantage of a one-time cut for repatriation of earnings and cash held overseas, which was written into the GOP tax overhaul. However, bearish bets on the dollar grew again in recent weeks, as wagers on the euro shot higher.

For investors seeking yield, “there is the most upside in countries like Europe and Japan, where monetary policy is the furthest away from normal,” said Kit Juckes, a strategist at Société Générale. “You don’t want to buy into stories that have largely played themselves out.”

Write to Ira Iosebashvili at ira.iosebashvili@wsj.com

European Shares Creep Lower Ahead of Central Bank Speeches

November 13, 2017

The British pound slipped on a potential leadership challenge in Parliament

 Image may contain: skyscraper, sky and outdoor

European stocks started the week mostly down after closing in the red Friday as investors appeared increasingly concerned over the U.S. tax-overhaul plan.

The Stoxx Europe 600 was 0.3% lower, led by losses in banking and financial services.

Futures pointed to a small opening loss for the S&P 500 and the Dow Jones Industrial Average, after both indexes posted drops last week. In Asia, markets were broadly down.

In currencies, the British pound dropped 0.9% Monday on weekend news that as many as 40 Conservative members of Parliament had agreed to sign a letter of no confidence in Prime Minister Theresa May, eight short of the number needed to trigger a leadership challenge.

Sterling could face further pressure this week, with several Bank of England members set to speak and data on U.K. inflation and retail sales due.

Some investors warned that the disunity within the ruling Conservative party could weigh on Brexit talks and diminish the probability of an extended transitional arrangement.

“I think the vulnerability in terms of the government and the lack of unity within the Conservative party means that the political backdrop for smooth Brexit negotiations has probably decreased slightly,” said Mark Richards, multi-asset Strategist at J.P. Morgan Asset Management.

The Amsterdam Stock Exchange in the Netherlands. European markets opened lower, led by losses in banking and financial services.
The Amsterdam Stock Exchange in the Netherlands. European markets opened lower, led by losses in banking and financial services.PHOTO: JASPER JUINEN/BLOOMBERG NEWS

Meanwhile, talks on the U.S. Republican tax proposals will continue to be in focus after concerns over their prospects for passage interrupted remarkable stock gains last week and “triggered some profit-taking activities,” said Margaret Yang at CMC Markets.

Among this week’s highlights will be speeches by central bank leaders, with European Central Bank President Mario Draghi and Federal Reserve Chairwoman Janet Yellen both set to speak Tuesday.

In the U.S., investors will keep a close eye on the October Consumer Price Index, due Wednesday, as a proxy for inflation. While the Federal Reserve is widely expected to increase rates in December, a soft inflation reading could fuel the debate around the flattening of the U.S. yield curve.

In the bond market, prices climbed, pushing down yields. The 10-year Treasury yield moved slightly lower Monday to trade at 2.373% according to Tradeweb, compared with Friday’s close of 2.397%. The 10-year German government bond yield was also off at 0.386%, from 0.407%.

Earlier in Asia, most major stock indexes logged declines, with Japanese stocks again underperforming after their gains of the past two months.

After logging its biggest drop percentage-wise in two months Friday, the Nikkei Stock Average fell a further 1.3%. Monday’s decline in Japan came despite a pullback in the yen.

Earnings, which had been supporting the market, also clouded sentiment, with real-estate developer Mitsui Fudosan and fiber maker Toray both off about 4%.

In South Korea, the Kospi index closed down 0.5%, while Hong Kong’s benchmark index got a boost from technology stocks. The Hang Seng Index was up 0.2%.

E-gaming services provider Razer surged as much as 41% in its market debut Monday; it was recently up 18%.

In the commodities market, Brent crude was down 0.3% at $63.33.

Write to Ese Erheriene at ese.erheriene@wsj.com

https://www.wsj.com/articles/global-markets-japan-leads-losses-early-1510537341

Wall Street Banks Warn Winter Is Coming as Business Cycle Peaks

August 23, 2017

Bloomberg

By Sid Verma and  Cecile Gutscher

August 22, 2017, 12:47 PM EDT August 23, 2017, 4:48 AM EDT
  • HSBC, Citigroup, Morgan Stanley say end of market boom is nigh
  • Breakdown in trading patterns is signal to get out soon
 Image result for Morgan Stanley, signage, photos

Gallo Says Investors Are Looking for Next Piece of Sugar

HSBC Holdings Plc, Citigroup Inc. and Morgan Stanley see mounting evidence that global markets are in the last stage of their rallies before a downturn in the business cycle.

Analysts at the Wall Street behemoths cite signals including the breakdown of long-standing relationships between stocks, bonds and commodities as well as investors ignoring valuation fundamentals and data. It all means stock and credit markets are at risk of a painful drop.

“Equities have become less correlated with FX, FX has become less correlated with rates, and everything has become less sensitive to oil,” Andrew Sheets, Morgan Stanley’s chief cross-asset strategist, wrote in a note published Tuesday.

His bank’s model shows assets across the world are the least correlated in almost a decade, even after U.S. stocks joined high-yield credit in a selloff triggered this month by President Donald Trump’s political standoff with North Korea and racial violence in Virginia.

Morgan Stanley

Just like they did in the run-up to the 2007 crisis, investors are pricing assets based on the risks specific to an individual security and industry, and shrugging off broader drivers, such as the latest release of manufacturing data, the model shows. As traders look for excuses to stay bullish, traditional relationships within and between asset classes tend to break down.

“These low macro and micro correlations confirm the idea that we’re in a late-cycle environment, and it’s no accident that the last time we saw readings this low was 2005-07,” Sheets wrote. He recommends boosting allocations to U.S. stocks while reducing holdings of corporate debt, where consumer consumption and energy is more heavily represented.

That dynamic is also helping to keep volatility in stocks, bonds and currencies at bay, feeding risk appetite globally, according to Morgan Stanley. Despite the turbulent past two weeks, the CBOE Volatility Index remains on track to post a third year of declines.

Morgan Stanley

For Savita Subramanian, Bank of America Merrill Lynch’s head of U.S. equity and quantitative strategy, signals that investors aren’t paying much attention to earnings is another sign that the global rally may soon run out of steam. For the first time since the mid-2000s, companies that outperformed analysts’ profit and sales estimates across 11 sectors saw no reward from investors, according to her research.

“This lack of a reaction could be another late-cycle signal, suggesting expectations and positioning already more than reflect good results/guidance,” Subramanian wrote in a note earlier this month.

Zero Alpha Beats – Bank of America Corp

Oxford Economics Ltd. macro strategist Gaurav Saroliya points to another red flag for U.S. equity bulls. The gross value-added of non-financial companies after inflation — a measure of the value of goods after adjusting for the costs of production — is now negative on a year-on-year basis.

“The cycle of real corporate profits has turned enough to be a potential source of concern in the next four quarters,” he said in an interview. “That, along with the most expensive equity valuations among major markets, should worry investors in U.S. stocks.”

The thinking goes that a classic late-cycle expansion — an economy with full employment and slowing momentum — tends to see a decline in corporate profit margins. The U.S. is in the mature stage of the cycle — 80 percent of completion since the last trough — based on margin patterns going back to the 1950s, according to Societe Generale SA.

Societe Generale SA

After concluding credit markets are overheated, HSBC’s global head of fixed-income research, Steven Major, told clients to cut holdings of European corporate bonds earlier this month. Premiums fail to compensate investors for the prospect of capital losses, liquidity risks and an increase in volatility, according to Major.

HSBC Holdings Plc

Citigroup analysts also say markets are on the cusp of entering a late-cycle peak before a recession that pushes stocks and bonds into a bear market.

Spreads may widen in the coming months thanks to declining central-bank stimulus and as investors fret over elevated corporate leverage, they write. But, equities are likely to rally further partly due to buybacks, the strategists conclude.

“Bubbles are common in these aging equity bull markets,” Citigroup analysts led by Robert Buckland said in a note Friday.

— With assistance by Cecile Vannucci

https://www.bloomberg.com/news/articles/2017-08-22/wall-street-banks-warn-winter-is-coming-as-business-cycle-peaks

U.S. stock futures edge higher as ‘Super Thursday’ arrives

June 8, 2017

Comey hearing, U.K. election and ECB meeting are all on deck Thursday

Stocks Inch Up Ahead of Comey Testimony, U.K. Election

Getty Images
Comey will testify before a Senate panel that is investigating if Russia interfered in the 2016 U.S. election

By SARA SJOLIN

MARKETS REPORTER

Wall Street was set for a slightly upbeat open, with markets taking a cautious tone as the “Super Thursday” of event risks finally arrived.

Futures for the Dow Jones Industrial Average YMM7, +0.14%  climbed 36 points, or 0.2%, to 21,199, while those for the S&P 500 index ESM7, +0.14%  added 3.85 points, or 0.2%, to 2,435.75. Nasdaq-100 index futures NQM7, +0.23%  gained 10.25 points, or 0.2%, to 5,890.

Investors were focusing on Thursday’s trio of events that could shake up markets: the U.K. general election, a European Central Bank policy meeting, and testimony from former Federal Bureau of Investigation Director James Comey’s on alleged Russian interference in the 2016 U.S. presidential election. Comey is scheduled to speak at 10 a.m. Eastern Time.

Read: What to watch when James Comey testifies to the Senate on Thursday

Comey’s prepared remarks to the Senate Intelligence Committee, released on Wednesday, helped stocks recover from losses late in the session. The Dow average DJIA, +0.18%  and the S&P 500 SPX, +0.16%  each ended up 0.2%, and the Nasdaq Composite Index COMP, +0.36%  closed 0.4% higher.

See: Comey’s juicy Trump account leaves some big questions unanswered

“Although Comey’s testimony has attracted most of the media headlines, we didn’t see any significant disclosures from the prepared remarks released yesterday,” said FXTM chief market strategist Hussein Sayed.
Comey’s Statement on Trump Meetings Reads Like a Screenplay
.

“While we cannot assume anything, a base case scenario would not be a big surprise to arise from Comey’s testimony before Congress. I think that the ECB meeting and the U.K. election are the risk events that will produce the big moves today,” he added in a note.

The ECB delivers its rate decision at 7:45 a.m. Eastern, followed by President Mario Draghi’s news conference at 8:30 a.m. Eastern. The central bank is widely expected to leave rates on hold, but is seen downgrading its inflation forecast.

Read: Why the ECB can take only ‘baby steps’ toward ending ultraloose monetary policy

In the U.K., voters headed to the polls in an election that turned out to be much more uncertain than anyone had predicted. Opinion polls are still giving Prime Minister Theresa May’s Conservative Party the lead, but the big question is whether the party will increase its majority in parliament. Polling stations close at 10 p.m. London time, or 5 p.m. Eastern, and the first exit polls will be released immediately after.

Read: U.K. election—these are the stocks and sectors to watch once the result is in

Also read: U.K. election: The worst, best and most likely scenarios for stocks world-wide

The pound GBPUSD, -0.1698%  traded at a two-week high as voting got under way, buying $1.2977, compared with $1.2960 late Wednesday in New York.

Economic news: A reading on weekly jobless claims is due at 8:30 a.m. Eastern, followed by a quarterly survey of services at 10 a.m. Eastern.

See: MarketWatch’s economic calendar

Stock movers: Shares of Yahoo! Inc. YHOO, +8.80%  climbed 8% in premarket trade. The move came after news late Wednesday that up to 1,000 layoffs are expected at the combined Yahoo and AOL companies set to be bought by Verizon Communications Inc. VZ, +0.13%

Advanced Micro Devices Inc. AMD, +2.91%  gained 1.4% ahead of the bell. The rise builds on recent days’ sharp rally following upbeat comments from Apple Inc.AAPL, +0.31%  and brokers regarding the chip maker.

Shares of Alibaba Group Holding Ltd. BABA, +11.55%  jumped 12% before the open after the Chinese e-commerce giant said revenues are expected to grow between 45% and 49% in 2018.

Other markets: Stocks in Asia closed mostly higher, although Japan’s Nikkei 225 index NIK, -0.38%  bucked the positive trend. The losses in Tokyo came after the yen jumped on reports the Bank of Japan is running simulations of exits from quantitative easing.

European stocks were little changed ahead of the ECB meeting and the U.K. election result.

Oil prices CLN7, -0.57%  rose 0.7%, rebounding after posting the biggest drop since March in Wednesday’s session. That slump followed a report of an unexpected climb in U.S. stockpiles.

Gold GCQ7, -0.67%  fell 0.4%, while the dollar DXY, +0.20%  was little changed against other major currencies.

http://www.marketwatch.com/story/us-stock-futures-edge-cautiously-higher-with-jam-packed-risk-agenda-ahead-2017-06-08

Trump’s Currency Complaints Hit Unexpected Targets

February 17, 2017

Top-five trading partners China, Japan and Germany brush them off; Taiwan and Switzerland seem to be paying heed

.

Feb. 17, 2017 3:47 a.m. ET

HONG KONG—U.S. President Donald Trump’s accusations of currency manipulation appear to be reaching an audience he may not have primarily intended.

Mr. Trump vowed on the campaign trail to revive American manufacturing, in part by taking a hard line on Chinese trade practices and labeling the country a currency manipulator. Since taking office, the president has accused both China and Japan of consistently devaluing their currencies,…

Mr. Trump vowed on the campaign trail to revive American manufacturing, in part by taking a hard line on Chinese trade practices and labeling the country a currency manipulator. Since taking office, the president has accused both China and Japan of consistently devaluing their currencies , while his top trade adviser Peter Navarro has accused Germany of benefiting from what he termed the “grossly undervalued” euro .

All three countries, which rank among the U.S.’s top five trading partners, have brushed off the Trump administration’s claims.

“No one has the right to tell us that the yen is weak,” Japan’s finance minister Taro Aso told parliament on Wednesday, following last weekend’s meeting between Mr. Trump and Prime Minister Shinzo Abe . Japan hasn’t directly intervened in currency markets since 2011 following a major tsunami and resulting Fukushima nuclear disaster.

“The charge that Germany exploits the U.S. and other countries with an undervalued currency is more than absurd,” Jens Weidmann , the president of the German central bank, said earlier this month.

China hasn’t directly commented on Mr. Trump’s criticisms, but most analysts say Beijing recently has been propping up the yuan by selling foreign-currency reserves rather than looking to weaken it.

Still, some smaller economies look like they are taking notice, notably Taiwan and Switzerland. The U.S. Treasury found in October that both had engaged in persistent, one-way currency intervention, essentially by buying foreign currencies like the U.S. dollar and selling their own to maintain weak exchange rates.

Image may contain: 2 people

Analysts say the central banks of Switzerland and Taiwan are now stepping back from those activities, perhaps to avoid closer scrutiny from the Trump administration. The upshot: The Swiss franc has advanced nearly 2% against the U.S. dollar this year, while the new Taiwan dollar has surged 5.3%. Both have outperformed the euro and yen since the U.S. election in early November.

Taiwan’s central bank bought $500 million in foreign currencies in the fourth quarter, well below its quarterly average of more than $3 billion since 2012, according to Khoon Goh , head of Asia research at ANZ in Singapore, who said he suspects it is stepping back from “currency-smoothing operations.” The central bank said it doesn’t comment on currency policy.

For the first nine months of last year, the Swiss National Bank /quotes/zigman/1379668/delayed CH:SNBN +0.12% intervened heavily in currency markets to slow the franc’s rise, spending an amount roughly equivalent to its current-account surplus for the period, J.P. Morgan/quotes/zigman/272085/composite JPM -0.76% analysts note. Over the following four months, the scale dropped to around two-thirds of the surplus.

“It’s not an entirely fanciful suggestion that the SNB might be tapering intervention in order to the guard against the risk of being cited by the U.S. Treasury as a currency manipulator,” the analysts wrote in a note.

The Swiss National Bank declined to comment.

For the U.S. to label an economy a currency manipulator under the current law, it must have a large trade surplus with the U.S. and a hefty current-account surplus and persistently intervene in the currency in one direction. As of October, no economies met all three criteria.

Recent comments from officials in South Korea, which the Treasury has flagged for its hefty trade surplus with the U.S. and its current-account surplus, suggest they’re similarly eager to avoid U.S. ire, says Govinda Finn , senior analyst at Standard Life Investments in Edinburgh. The Korean won has surged 5.2% against the dollar this year.

But any gains in the Korean and Taiwanese currencies due to U.S. political pressure may not last, he said: “On a longer-term horizon, there’s a pretty strong case to say both of those currencies can and will weaken as the authorities look to support their economies.”

Jenny W. Hsu contributed to this article.

Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com

Brexit: The stock market is telling us that the British establishment will be in freefall for some time to come

June 28, 2016
 .
There are many potential visions for the UK after Brexit
.

For once, the market reaction is not an exaggeration. Investors have been seriously wrongfooted by the result of the UK referendum. But the shock of City traders on Friday morning is nothing compared with the stunned response of the people who thought they ran the country.

One way or another, we know markets will find their level — dramatically so, in the case of the pound. The British establishment will be in freefall for some time to come.

David Cameron will be blamed for setting us on this course — for putting the interests of Conservative party unity ahead of the country. For business people and policymakers outside the UK, the decision to trigger all the uncertainty of a referendum has long seemed a self-inflicted and entirely unnecessary wound. But the stark regional divide in the voting underscores that there is plenty of blame to go round.

It is not only Conservative governments that have failed to rebalance Britain’s economy in recent years — failed to give the country’s post-manufacturing hinterland a stake in London’s truly global success. It should be no surprise that large numbers have now voted to put that cosmopolitan prosperity at risk.

The economic and political questions raised by this vote will not be answered for years, possibly decades. But three immediate questions present themselves for investors and the wider world.

The first is how long the “risk-off” mood now permeating markets will last, and how much damage it will do. A prolonged decline in market confidence globally would make it more difficult for the US central bank to contemplate higher interest rates in the second half of this year, particularly with the presidential election looming. It would also put pressure on central banks with safe haven currencies, such as the yen and the Swiss franc, to ease policy to prevent them rising even further. At the extreme, it could persuade investors that the next bear market is nearer than they previously thought.

Whether that happens will depend on investors’ answers to the second immediate question, which is: how much damage will this do to real economic activity in the UK and further afield.

The best estimate has been that the shock will take at least a percentage point off the UK’s growth rate over the next year. So the annualised pace of growth in gross domestic product would fall from 1.6 per cent to about 0.6 per cent in the second half of 2016, with a similar growth rate in 2017. The fall in the pound would push inflation up to 3 or 4 per cent by the end of 2017, although given the slowdown in the economy we would expect that to be temporary.

Clearly, there is huge uncertainty around those estimates, and about the likely impact on growth in the eurozone, which we reckon to be in the order of 0.4 percentage points of GDP over a similar period.

If this rough assessment is right, the Brexit vote has produced a large shock, but a local one. There will be an economic and financial impact on the rest of the world, and especially Europe, but it should be manageable. Whether the political implications will also be containable, particularly in Europe, is another matter.

Brexit: short shock or a reset in asset values?

That brings us to the third, and probably most important, question: what, exactly, will the UK leave to? There has been a lot of discussion already of the mechanics of Britain’s exit and how long it will all take. But the thorniest questions for the Leave side right now are not technical. They are profoundly philosophical.

Many leading figures in the Leave coalition want Britain to throw off the shackles of Brussels and seize the opportunities that the modern global economy presents. Yet many of the voters who chose Brexit are hoping for exactly the opposite.

There are many potential visions for the UK after Brexit — not all of them disastrous. But there is none that would allow the country to be both open and closed — both to embrace the future and to turn back time. The real indictment of the Remain campaign is that, in all these months, they never got this basic incoherence in the Leave side across.

The writer is the chief markets strategist for Europe, JPMorgan Asset Management

https://next.ft.com/content/84dcc868-39dd-11e6-9a05-82a9b15a8ee7

Asia Stocks Lower Amid Fears of U.S. Rate Hike Fragility of China’s Economy

May 18, 2016

The Associated Press

May 18, 2016

KUALA LUMPUR, Malaysia — Asian shares fell Wednesday amid concerns that higher-than-expected U.S. inflation could trigger rate hikes. Shares in Tokyo also fell, ceding initial gains from better-than-expected GDP data, and China markets succumbed to a fresh bout of pessimism.

KEEPING SCORE: Japan’s Nikkei 225 stock index shed 0.1 percent to 16,644.69. The Shanghai Composite index dropped 1.9 percent to 2,788.20 and Hong Kong’s Hang Seng lost 1.7 percent to 19,786.00. South Korea’s Kospi lost 0.6 percent to 1,956.73. Australia’s S&P/ASX 200 fell 0.7 percent to 5,356.20.

JAPAN’S SURPRISE: Annual growth in the first quarter of the year was a faster-than-expected 1.7 percent, the government reported. Solid consumer demand and higher government spending helped offset weak business investment and sluggish exports.

CHINA GLOOM: Recent data have come in weaker than hoped, underscoring the fragility of China’s economy. Meanwhile, investors appeared disappointed by a lack of fresh market-boosting initiatives from Beijing during a visit by a top Communist Party official, Zhang Dejiang, to Hong Kong.

WALL STREET: The Dow Jones industrial average lost 180.73 points, or 1 percent, to 17,529.98. The S&P 500 index gave up 19.45 points, or 0.9 percent, to 2,047.21. The Nasdaq composite pulled back 59.73 points, or 1.3 percent, to 4,715.73.

ANALYST VIEWPOINT: “U.S. investor nerves were triggered by a stronger than expected read on headline CPI for April. The question of whether underlying US inflation surprises to the upside this year is near the top of the list for major market issues at the moment. If it does, U.S. rate hikes could be in prospect,” Ric Spooner, chief market analyst for CMC Markets, said in a research note.

ENERGY: U.S. crude oil rose 6 cents to $48.37 a barrel in electronic trading on the New York Mercantile Exchange. It rose 59 cents to $48.31 a barrel in New York. Brent crude, used to price international oils, gained 5 cents to $49.32. It rose 31 cents to $49.28 a barrel in London.

CURRENCIES: The dollar was flat at 109.14 yen. The euro slipped to $1.1285 from $1.1314.