Shares, Bonds, Gold supported ahead of estimated ECB action
European shares detained close to a seven-year high on today and Asian shares strike a six-week high point investors bet the European Central Bank would show a stimulus force to increase the flagging euro zone economy.
Prospects that the ECB will declare a sovereign bond-buying agenda this Thursday – with the possible size seen at around 600 billion euros ($690 billion), according to a Reuters poll – also kept euro zone core bond yields close to record lows and the euro close to an 11-year channel.
The Japanese yen for now climbed by around 1% against the U.S. dollar (USD/JPY) after the Bank of Japan kept policy unchanged. As the decision not to extend its stimulus package had been broadly estimated, some had also bet on a surprise progress as inflation targets looked mysterious.
Company trading update from brewer SABMiller (L:SAB) and semiconductor equipment-maker ASML (AS:ASML) got a positive response, with shares of SAB up 2.2% and ASML up 4.7%. A weaker euro and latest slide in oil are seen increasing most euro zone firms’ earnings this year.
Traders, nevertheless, also pointed to waves of anxiety ahead of the ECB’s meeting, given the risk of regret if the ECB did not meet market expectations.
“A significant percentage of the market is factoring in some sort of quantitative-easing declaration, so there is a touch of trepidation,” said Alistair McCaig, analyst at IG. “Investors have bought the rumor so they can sell the news.”
ECB Governing Council member Ewald Nowotny told a Euromoney conference in Vienna that the central bank’s Thursday meeting would be exciting but one “shouldn’t get manic about it”.
Bets on euro zone economic stimulus also spread during the commodities markets, with gold rising above $1,300 an ounce for the first time since August. The predictions of looming deflation and increased market volatility were quoted as factors supporting demand for bullion.
Sterling fell to the day’s low against the euro and the dollar after the minutes of British central bankers’ last policy meeting showed a rate climbing was less likely.
Two policymakers dropped their call for higher rates in the face of falling inflation.
Oil costs edged up, with Brent crude hovering above $48.50, in the wake of a latest heavy sell-off in oil that led Total’s (PA:TOTF) chief executive to say the French energy key plans to cut funds spending by 10 percent this year.
Rather, firmer energy prices were not sufficient to stop the Russian rouble falling more on Wednesday, though, with the currency down 1 % against the dollar as fighting intensified in eastern Ukraine.
($1 = 0.8653 euros)