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Markets Update am

  • Aussie leads declines among major currencies; gold drops
  • BOJ’s Kuroda says further monetary easing is possible

Global equities fell toward a one-month low amid a slew of disappointing corporate earnings, while prospects for more monetary stimulus in Japan weakened the yen. Copper led gains in industrial metals and crude oil stayed above $46 a barrel.

The yen lost ground against most of its major counterparts after Bank of Japan Governor Haruhiko Kuroda said policy can be loosened further if needed.

Australia’s currency slumped as much as 0.8 percent. An exchange-traded fund tracking Brazilian shares held at this month’s high before a vote to impeach President Dilma Rousseff. Copper rose in London, while gold retreated after its biggest gain this month.

Asian shares fell on Thursday following a dismal session on Wall Street, while the dollar firmed but remained shy of this week’s highs and crude oil gave back some of its recent gains.

The gloom was expected to carry over to Europe, with financial spreadbetters at IG predicting Britain’s FTSE 100 .FTSE would open down by 0.4 percent. And it did.

Pessimism over the global economic outlook and concern over central banks’ firepower already keeping investors nervous, the corporate earnings season has provided little in the way of support for equity markets, which lost more than $1 trillion in value last week. Japanese profits have in the main proved disappointing so far, while in the U.S. results from Macy’s Inc. and Walt Disney Co. missed estimates on Wednesday. LafargeHolcim Ltd., the world’s largest cement company, reported lower earnings on Thursday than analysts forecast and Credit Agricole SA reported a drop in net income.

  • The euro area and India are scheduled to release industrial output data on Thursday, while U.S. weekly jobless claims figures are also due.
  • The Bank of England is seen leaving interest rates unchanged at a monetary policy review,
  • as is Norway’s central bank.
  • European Central Bank Vice President Vitor Constancio will speak in Madrid,
  • and the heads of Federal Reserve Banks for Boston, Kansas City and Cleveland are due to give presentations that may include comments on the U.S. rate outlook.

European stocks are mirroring a mostly soft Asian session after Wall Street suffered a sharp reversal on Wednesday amid concerns about the health of the US consumer.

Sterling is a touch weaker as traders await a monetary policy update from the Bank of England. Oil is adding to its latest strong gains.

The pan-European Stoxx 600 is down 0.7 per cent as banks and miners pull back. The FTSE Asia Pacific index is off 0.2 per cent after Australia and Greater China equity benchmarks struggled to make headway.

There are lingering concerns that the travails of brick and mortar retailers — the monthly retail sales report is due on Friday — may point to US households becoming more cautious, which has worrying implications for the dynamism of the world’s biggest economy.

That reasoning may explain why the stock market did not receive its of late traditional boost from surging oil prices.

West Texas Intermediate, the US crude benchmark, jumped 3.5 per cent on Wednesday after US crude inventories fell by 3.4m barrels last week, countering expectations for a gain. Currently, WTI is up another 0.1 per cent to $46.27 and Brent crude is barely changed at $47.60.

Rebounding oil prices in recent months have calmed nerves about the financial fragility of the energy sector. But if consumer confidence is waning, then higher energy costs will hit household budgets and may only make matters worse.

Such concerns are encouraging investors to buy fixed income assets, pressuring yields. The 10-year Treasury yield is steady on the day but at 1.73 per cent it sits near its lowest in nearly five weeks.

Equivalent maturity German Bunds are down one basis point to 0.12 per cent and UK Gilts are easing 1bp to 1.39 per cent ahead of the Bank of England’s interest rate announcement due at 12:00 BST.

The BoE will also publish its inflation report and investors will be keen to see if it offers further clues to the likely trajectory of monetary policy.

Sterling, which has been buffeted of late by “Brexit” concerns, is down 12 pips to $1.4434.

With the euro off 0.1 per cent to $1.1420, this leaves the dollar index just 0.1 per cent firmer at 93.92.

The dollar at the start of this month hit its lowest point since January 2015, before staging a recovery last week. Many analysts have suggested that the dollar still has further to climb, although this could pose its own challenges.

“Currency markets are prone to overshooting and we are not persuaded that the dollar has entered a prolonged period of weakness, even if short-term repositioning and momentum trading might push it a bit further in the short term,” said Larry Hatheway, chief economist at asset manager GAM


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