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European shares dollar edge up, ECB keeps investors wary

Shares edged up in Europe and the dollar made slight gains on Thursday, with investors focusing on the European Central Bank, which is expected to keep the door open to more economic stimulus after its latest policy-setting meeting.

Chinese stocks were a bright spot – solidly in positive territory and recovering from Wednesday’s worst one-day fall in five weeks.

Worries that global economic growth is slowing, particularly in China, have depressed stock and commodity markets across the globe in recent months and prompted a series of downgrades to economic forecasts from the International Monetary Fund and others.

Citi’s economics team, led by influential chief economist Willem Buiter, cut on Wednesday its 2016 global growth outlook to 2.8 percent – a rate Buiter has previously said represents a recession.

While the ECB is not expected to take any new policy steps on Thursday, bank president Mario Draghi may signal readiness to extend its 1 trillion euro bond-buying quantitative easing scheme if necessary.

“Watch out for hints of broader QE and whether further interest rate cuts may have been discussed,” said Commerzbank rates strategist Rainer Guntermann. “Yet, the bar for a dovish surprise is high.”

The pan-European FTSEurofirst 300 stocks index rose less than 0.1 percent in early deals, helped by an increased full-year sales outlook from Swiss drugmaker Roche. The company’s shares were up 1.2 percent.

Earlier MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.3 percent. Japan’s Nikkei closed down 0.6 percent.

However, China bucked the trend, rebounding from Wednesday’s roughly 3 percent dive. The Shanghai Composite index and the CSI300 both rose 1.5 percent.

The dollar, which has been losing ground in the past month as expectations the Federal Reserve will raise interest rates this year have waned, edged up against a basket of currencies.

The euro fell 0.2 percent to USD 1.1313 as investors were wary of the prospect of more ECB. The dollar was down 0.2 percent at 119.76 yen.

Euro zone government bonds reflected the wait-and-see mood before the ECB and Draghi’s news conference. Benchmark German 10-year Bund yields were flat at 0.57 percent


The dollar’s relative weakness brought some respite for oil prices, which hit a three-week low on Wednesday after a larger-than-expected rise in U.S. crude stocks.

Brent, the global benchmark, was last up 21 cents at USD 48.06 a barrel while U.S. crude rose 23 cents to USD 45.43.

“I wouldn’t want to conclude there is a real bounce going on,” said Ric Spooner, chief market analyst at Sydney’s CMC Markets. “I’d like to see U.S. crude go beyond USD 46 a barrel to conclude the downtrend had finished.”

Gold held near its lowest in more than a week, last trading at USD 1,167 an ounce, having touched USD 1,165.30 on Wednesday.

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