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Markets Update am

Europe Shares Fall as Commodities Slide, German Ifo Disappoints

  • Asia stocks, dollar slip as markets await Fed, BOJ meetings

Asian shares and the dollar dropped on Monday as investors took profits from the currency’s recent gains ahead of central bank meetings in the United States and Japan this week.

European shares declined a third day as energy and commodity producers slid, while investors assessed earnings and growth prospects following worse-than-expected German business-confidence data.

  • Rio Tinto Group and BHP Billiton Ltd. fell at least 3.4 percent, leading miners to the biggest decline of the 19 industry groups on the Stoxx Europe 600 Index as base metals retreated.
  • BP Plc dragged oil companies lower as crude slid.
  • Automakers dropped, with Volkswagen AG losing 2.4 percent and Daimler AG falling 2.1 percent.
  • Royal Philips NV slid 4.5 percent after saying it is considering an initial public offering of its lighting business, as it reported better-than-estimated quarterly profit.

MSCI’s broadest index of Asia-Pacific shares outside Japan,was down 0.4 percent, taking its cue from a mixed day on Wall Street on Friday.

Chinese shares were down, with the blue-chip CSI300 index .CSI300 slipping 0.5 percent, while the Shanghai Composite Index .SSEC lost 0.6 percent.

Markets in Australia were closed for the Anzac Day holiday.

Japan’s Nikkei stock index .N225 ended down 0.8 percent as the yen pulled off its lows.

Investors also locked in gains after the index on Friday soared to an 11-1/2 week high following a report the Bank of Japan will mull another easing step at its two-day policy review that begins on Wednesday.

Japan’s central bank is likely to cut its price forecasts and debate whether a strong yen, weak global demand and soft consumption have hurt inflation expectations enough to warrant another blow of stimulus.

Bloomberg reported on Friday that the BOJ is considering applying negative rates to its lending program for financial institutions.

But some investors still believe the central bank might opt to hold steady as it assesses the impact of the negative interest rate policy it unveiled on Jan. 29.

“Market participants are looking for new drivers for risk this week,” Bernard Aw, a market strategist at IG Asia Pte. in Singapore, said by phone. “With the barrage of economic data and two major central meetings, there will not be a shortage of catalysts.”

 China is scheduled to release figures on March industrial profits on Wednesday, while Japanese data on inflation, retail sales and unemployment are due Thursday. Earnings will also be in focus, with Japan’s Nomura Holdings Inc. and major Chinese banks scheduled to report this week.
Currencies:
Against the yen, the dollar slipped 0.6 percent to 111.11 yen JPY= after it earlier rose as high as 111.90, its loftiest peak since April 1.
“The wide interest rate differential between the U.S. and Japan make it costly to be long yen without momentum,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York, said in a note to clients.  “Momentum and trend followers appear heavily represented in the futures market, and they have been caught the wrong way. This may see the tone shift from selling dollar rallies to buy dips,” Chandler said.

The dollar index, which tracks the greenback against a basket of six rival currencies, fell 0.2 percent to 94.931 .DXY.

The euro added 0.2 percent to $1.1243 EUR=. Last week, the European Central Bank held its policy rates at historic lows, as expected.

The Fed, which lifted its benchmark overnight interest rate in December for the first time in nearly a decade, meets on Tuesday and Wednesday.

Its policymakers are expected to hold interest rates steady, but may tweak their description of the U.S. economic outlook to reflect more benign conditions, leaving the path open for future rate rises.

A Reuters poll showed on Friday showed that economists expect the Fed to stand pat and deliver a rate hike in June, followed by another before the end of this year.

Crude oil prices slipped after rising on Friday and notching their third straight week of gains as market sentiment turned more upbeat amid signs a persistent global supply glut may be easing. [O/R]

Brent LCOc1 fell 1 percent to $44.64 a barrel, while U.S. crude CLc1 shed 1.3 percent to $43.16.

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