European shares follow Asia lower, dollar weak before Fed

Thursday, 30 April 2015 00:26 - - {{hitsCtrl.values.hits}}

Reuters: Stocks fell in Europe on Wednesday, following Asian stocks lower, while the dollar held near two-month lows before a Federal Reserve policy statement expected to show the US central bank in no hurry to raise interest rates. The Fed wraps up its two-day meeting with the US economy in something of a soft patch – data due later on Wednesday is expected to show growth slowed sharply in the first quarter – that has weighed on the dollar and, in the view of many analysts, pushed back the first US rate rise since 2006. The dollar index, which measures the greenback against a basket of currencies, fell 0.2% to its lowest since 5 March, despite a rise in US Treasury yields that took the 10-year yield over 2% for the first time in a month. The euro was up 0.1% at $1.0994, having hit a three-week high on Tuesday and come within a whisker of $1.10. The yen was down 0.1% at 118.90. European shares gave up early gains to trade slightly lower on Wednesday as investors digested a batch of mixed corporate results from bank BBVA and UK retailer Next, among others. The pan-European FTSEurofirst 300 index was down 0.1%. “If corporate results are good you can continue to see positive openings and some stocks will perform very well but the move yesterday suggests people are taking risk off the table and that can continue at least this week,” Mike Reuter, a broker at Tradition said. MSCI’s broadest index of Asia-Pacific shares outside Japan retreated 1% having touched their highest since early 2008 at one point. Chinese shares rose, however, with gains in resources stocks and start-ups offseting losses in banks. The CSI300 .CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 0.7%. Trade in Asia was thinner than usual with Japanese markets closed for a holiday. On Wall Street, the Dow had ended Tuesday with gains of 0.4%, while the S&P 500 rose 0.28% and the Nasdaq dipped 0.1%. The biggest boost to the Dow was a 1.9% gain in IBM shares after the company raised its quarterly dividend by 18%, the biggest increase in five years. Apple hit a record high after stellar results, but still ended down 1.6%. Shares of Twitter dropped as much as 24% after its results disappointed, before closing with a loss of 18.2%. In European fixed income markets, investors awaited a slew of bond issuance, from Germany, Italy and Portugal. The Fed’s policy statement is due at 1800 GMT. Before that, data is expected to show the US economy grew at a 1.0% annual pace in the first quarter, down from 2.2% in the previous three months. “Investors are approaching FOMC with the view it will bore as much as possible. The risk is that what is neutral to the Fed may be surprisingly upbeat to the market,” said analysts at Citi. “We would not see this as a big near-term boost to the dollar and bond yields, but more a reminder that the Fed remains hopeful that data will improve sufficiently for a lift-off in September.” Oil prices fell as oversupply and weak demand outweighed uncertainty over the impact of Saudi King Salman bin Abdulaziz’s decision to sack his younger half-brother as crown prince in favor of his nephew. Brent crude LCOc1 fell 28 cents to $64.36 a barrel. Gold traded near three-week highs with the dollar soft. Spot gold last traded at $1,207.72 an ounce.

Thailand surprises with another rate cut to bolster economy

Bangkok (Reuters): Thailand’s Central Bank surprised markets by cutting its key policy rate for a second straight meeting on Wednesday, as policymakers reacted to pressure to revive a weakening economy. The Central Bank also announced it would relax curbs on capital movements out of Thailand on Thursday, a move aimed at reducing the baht’s strength. The baht fell to a six-week low after the unexpected rate cut. Nearly a year after seizing power in Southeast Asia’s second-largest economy, Thailand’s military government has struggled to combat stubbornly weak domestic demand and overcome the impact of weak exports on growth. The economy expanded just 0.7% in 2014, the slowest pace since flood-hit 2011. The Central Bank’s monetary policy committee (MPC) voted 5-2 to cut the one-day repurchase rate by 25 basis points to 1.50%, confounding market expectations for no change. In March, the Central Bank also unexpectedly cut the policy rate by 25 basis points, the first rate change in a year. Mathee Supapongse, Secretary of the Central Bank’s monetary policy committee, said the back-to-back rate cut might be considered “quite strong medicine.” “It’s a surprise for the market but we still have sufficient monetary policy scope to support the economy going forward,” he added. Consumer prices fell for a third straight month in March, giving policymakers leeway to loosen policy. The MPC said in a statement economic growth was weaker than expected and there was a risk consumer prices would fall further. It added that proposed higher government spending would not be able to offset the slide in exports. Earlier on Wednesday, Thailand’s finance ministry trimmed its 2015 growth and export forecasts. Thailand’s rate cut comes as other central banks in Asia also loosen policy to support growth. But policymakers remain wary about capital outflow risks as the U.S. Federal Reserve is expected to raise interest rates this year.