World stocks wilt with the euro rising on ECB winding down its stimulus programme

Trade tensions

Any changes to the ECB’s asset-purchase programme should appear in the ECB policy statement at 11.45am GMT. The bank’s president Mario Draghi then holds a news conference at 12.30pm GMT.

The biggest complication for the ECB might be the increasingly murky economic outlook. The continent faces a developing trade war with the US, a populist challenge from Italy’s new government and softening export demand.

Also keeping investors in check was concern about US threats to impose tariffs on $50bn of Chinese goods. US President Donald Trump will meet with his trade advisers later to decide whether to activate the tariffs, a senior administration official said on Wednesday.

The S&P 500 and Dow Jones had both lost 0.4% to 0.5%, and the Nasdaq Composite dropped 0.11%. Futures markets pointed to subdued restart later.

The dollar stood at ¥110.06 after falling from a three-week high of ¥110.85 following the Fed’s decision. The dollar index, which tracks it again six top currencies, also erased all this week’s gains.

The Australian dollar fell 0.35% to $0.7551 after China’s poor economic data, but the yuan showed little reaction, especially after the People’s Bank of China opted not to raise its rates.

“There is no urgency for China to maintain its favourable yield differential against the US as capital outflow and currency stability is no longer the key concern for China at the moment,” said Tommy Xie, an economist at OCBC Bank. “With a US-China trade war looming, a slightly weaker yuan may be in China’s favour.”

Some emerging-market currencies have been hit hard by worries that higher US interest rates could prompt investors to shift funds to the US. The dip in the dollar on Thursday brought welcome relief.

SA’s rand rebounded from a six-month low; the Turkish lira pulled out of a dive; and the Mexican peso recovered from a 16-month low.

Among commodities, China-sensitive industrial metals sagged but gold and other precious metals made ground.

Oil prices were little changed, underpinned by a bigger-than-expected decline in US crude inventories and surprise drawdowns in petrol and distillates, which indicated strong demand in the world’s top oil consumer.

Brent and US crude futures traded at $76.83 and $66.67 a barrel, respectively, to extend their recovery from eight-week lows touched last week.

Reuters

Source: businesslive.co.za