Stocks Steady Ahead of ECB Meeting -- Update
19 January 2017 - 9:51PM
Dow Jones News
By Riva Gold
Stocks and currency markets steadied Thursday while bond yields
continued to rise ahead of a monetary policy update from the
European Central Bank.
The Stoxx Europe 600 reversed early gains to trade down 0.1%
midmorning, while futures pointed to a less than 0.1% opening loss
for the S&P 500.
The euro rose 0.3% against the dollar to $1.0665 while the WSJ
Dollar Index edged down 0.2% following its biggest daily gain of
the year.
The ECB is widely expected to leave its policy mix unchanged
midday after extending its program of quantitative easing in
December, but President Mario Draghi's press conference will be
closely watched for hints at when the program will end.
Eurozone economic activity touched a five-year high in December
while German inflation figures have come in stronger, prompting
calls from German policy makers to wind down bond purchases. Still,
most market participants expect Mr. Draghi to reiterate that the
ECB intends to maintain its presence in fixed-income markets for
now and reiterate support for the economy where needed.
"There's absolutely no argument for Draghi to change anything,"
said Franck Dixmier, Global Head of Fixed Income at Allianz Global
Investors. "It's really too early."
Elsewhere, the dollar and bond yields had risen Wednesday after
robust inflation data and a speech by Federal Reserve Chairwoman
Janet Yellen raised expectations for higher U.S. interest
rates.
Ms. Yellen warned that waiting too long to raise interest rates
could invite a "nasty surprise" of inflation. The dollar rose
sharply after her speech following a steep decline at the start of
the week, while U.S. Treasury yields and S&P 500 financials
moved higher as investors interpreted the comments as signaling
more rate increases in 2017.
"With only two hikes totally priced in, there's a kind of
fragility here, " said Mr. Dixmier. "Higher inflation pressure
means the Fed will have to act."
The yield on the 10-year Treasury note rose to 2.427% Thursday
from 2.391% previously. 10-year German bund yields climbed to
0.308% from 0.272%. Yields move inversely to prices.
Back in stock markets, the Stoxx Europe 600 edged down despite
gains in the basic resources sector. Shares of BHP Billiton rose
0.5% after the company along with Vale and their Brazilian iron-ore
joint venture agreed on a plan with federal prosecutors for
negotiating a settlement of a civil claim linked to a dam failure
that killed 19 people.
Shares of Zodiac Aerospace were up nearly 22% after French
aerospace supplier Safran said it had agreed to buy the beleaguered
cabin-interiors specialist. Shares of Safran were up 1.8%.
The oil and gas sector declined after oil prices fell sharply in
the previous session as the dollar strengthened and concerns rose
about rising U.S. shale production. Brent crude rose 0.5% early
Thursday to $54.21 a barrel.
Earlier, shares in Japan rose 0.9% as a weaker yen lifted the
export-heavy index. The dollar later gave up gains against the yen
to trade down 0.1% at Yen114.5630.
Shares of Toshiba fell sharply following a local news report
that the company's nuclear power-related losses could top
expectations. Toshiba said the report isn't based on what it has
announced.
Shares elsewhere in Asia edged lower, with Hong Kong's Hang Seng
down 0.2% and the Shanghai Composite Index off 0.4%.
-Kosaku Narioka contributed to this article.
Write to Riva Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
January 19, 2017 05:36 ET (10:36 GMT)
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