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A stronger dollar and slightly higher global borrowing costs have kept world shares subdued and left gold limping toward its worst week since December.

Europe’s main London, Frankfurt and Paris markets barely budged in early moves, keeping MSCI’s 47- country world index just in the black on the day but facing its third red week of the last four.

Wall Street futures were pointing slightly higher, but the there too the S&P 500 and Dow Jones are both down around 1 per cent for the week.

Modest gains for the dollar meant the euro was set to post its second biggest weekly loss in nearly four months . Caution over the Italian election also gave bonds there their toughest week of 2018.

Polls point to a hung parliament in Italy, where no one party or coalition has an outright majority to form a government, and analysts expect short-term volatility that could weigh on traditionally sensitive euro zone markets.

Italy’s 10-year bond yield was up 1 bps at 2.09 per cent . It has risen about 10 basis points this week.

“Some long-forgotten patterns return to euro bond markets with Bunds rallying while Italy sells off,” said Commerzbank rates strategist Christoph Rieger.

He noted comments from European Commission President Jean-Claude Juncker this week, who was reported to have warned about Italian election risks.

Broader global cross-asset issues remained much the same as they have during a choppy few weeks. How far and fast US interest rates can rise and what would it mean for global borrowing costs, risk appetite and business confidence.

That caution is reverberating in the bond markets with US yields rising by more than 50 basis points since early December, more than the 38 basis points for German government debt.

Benchmark Treasury 10-year note yields rose to a four-year high of 2.957 per cent on Wednesday though they were a shade below 2.90 per cent on Friday.

The backsliding also trimmed the dollar’s overnight gains in Asia. It was treading water against most major currencies ahead of US trading, buying 106.8 yen and at $US1.2306 and $US1.3965 against the euro and pound.

It was still up more than 1 per cent for the week though and headed for its third gain in the last four weeks.

“We think the Fed could well put US (interest) rates up four times this year but even then it only takes US rates to 2.5 by the end of the year,” said JPMorgan Asset Management global strategist Mike Bell. “So the question is would they continue at that pace in 2019?”

One of the Fed’s chief doves, St Louis Fed President James Bullard, tried to tamp down those expectations of four rate hikes this year on Thursday, saying policymakers needed to be careful not to slow the economy.

Russian markets were readying for a big day with S&P Global due to review Moscow’s credit rating.

It is just one step away from returning Russia to the investment grade bracket that it ejected it from after the 2014-2015 slump in oil prices and the Ukraine crisis. Its resurrection would also see Russian foreign currency bonds return to some widely-tracked bond indices.

In Asian trading overnight, MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.9 per cent on Friday to add to the previous week’s 3.9 per cent gain.

It is still down more than 4 per cent in February so far, however, after global equity markets were mauled at the start of the month by worries that inflation was picking up.

Japan’s Nikkei rose 0.7 per cent, though China’s SSE Composite index and the blue-chip CSI300 both pared early gains after the government seized control of acquisitive financial conglomerate Anbang Insurance.

It was seen as a dramatic move that underscores Beijing’s intent to crackdown on financial risk.

There were equally significant signs emerging from China’s central bank. Liu He, a Harvard-trained economist who is a trusted confidant of Chinese President Xi Jinping, has emerged as frontrunner to be the next governor of the People’s Bank of China (PBOC), sources told Reuters.

Liu would replace current PBOC chief, 70-year-old Zhou Xiaochuan, who is China’s longest-running head of the central bank, having taken the job in 2002. Zhou is expected to retire around the time of the annual session of parliament in March.

Chinese currency, the yuan, notched marginal losses in the what has been a holiday-shortened week.

The dollar’s strength meant it remained a tough environment for commodities which are priced in the US currency.

US West Texas Intermediate (WTI) crude futures were at $US62.74 a barrel, down 3 cents from their last settlement, while Brent crude futures were down 2 cents at $US66.37 a barrel.

There were concerns about high US crude export levels which outweighed an unexpected drop in oil inventories in the country which is also the world’s biggest fuel consumer.

Industrial metals such as copper eased as they headed for a small weekly drop and as trading slowly picked up again after Chinese markets had been shut following the Lunar New Year holiday.

Gold remained the stand-out mover though and looking increasingly less precious.

Its spot market price was down 0.2 per cent at $US1,328, heading for a fifth session of falls in six. It has shed 1.6 per cent this week, its biggest drop since early December.

“We remain somewhat cautious on gold over the short term given that we think the dollar rally is still not over, especially in the light of US Treasury yields remaining elevated,” said INTL FCStone analyst Edward Meir.