Inflation in focus, euro stocks weak, US$ firms
Bear market: A man looks at an electronic board showing stock information at a brokerage house in Wuhan. The bear market in Chinese stocks deepened yesterday. Picture: Reuters
Saturday, June 14, 2008
EUROPEAN stocks recovered and Wall Street looked set for a positive start yesterday after US inflation data fell short of investors' worst fears about rising costs.
The US dollar remained broadly firmer with early signs that Irish voters may have voted "no" to a new European Union treaty adding to euro weakness. Ten-year eurozone government bond yields were at their highest in nearly a year.US CPI data came in with a higher-than-expected year-on-year rate of 4.2 per cent in May, up from 3.9 per cent a month earlier.
But investors focused on core inflation minus energy prices which was an expected 0.2 per cent month on month.
"It's not as bad as it looks. It's pretty concentrated in the energy sector," said Lindsey Piegza, FTN Financial market market analyst in New York. "What is scary is the year-over-year number. You never wants to see a 4 (per cent) handle."
Inflation worries currently preoccupy financial markets and were hitting stocks and bonds in Europe while boosting the dollar.
"Inflation is a major negative factor for equities," said Arthur van Slooten, strategist at Societe Generale, in Paris.
The FTSEurofirst 300 index of top European shares was down 0.2 per cent, well off its lows. It gained 0.9 per cent on Thursday, snapping a six-session losing run.
Earlier, Japan's Nikkei stock average rose 0.6 per cent, primarily on the view that exporters would benefit from a weaker yen if the US dollar rises.
Still, the benchmark Nikkei average posted its worst weekly fall in three months as worries about rising inflation and interest rate hikes dampened investor appetite.
The Nikkei ended the day up 85.13 points at 13,973.73. Over the week, it lost 3.6 per cent.
Crude oil was down slightly in the day but still above a heady US$135 a barrel.
The US dollar rose against the euro and the yen and was on track for its best week in over three years against a basket of currencies.
Traders were sensitive to comments from Group of Eight finance ministers meeting in Japan over the weekend.
"If the tone of (the G8) statement is unchanged from the last meeting when coordinated action was mentioned, this would give more support to the dollar," said Michael Klawitter, currency strategist at Dresdner Kleinwort in Frankfurt.
The US dollar index against major currencies was up 0.6 per cent at 74.269. It was up more than 2 per cent on the week and heading for its biggest weekly gain since April 2005.
The euro was down 0.8 per cent at US$1.5319, with losses exacerbated by the early indications from Ireland. A "no" vote could scupper EU reform plans.
The US dollar was up 0.3 per cent against the yen at ¥108.28. Inflation worries continued to hit fixed income. Reuters
The US dollar remained broadly firmer with early signs that Irish voters may have voted "no" to a new European Union treaty adding to euro weakness. Ten-year eurozone government bond yields were at their highest in nearly a year.US CPI data came in with a higher-than-expected year-on-year rate of 4.2 per cent in May, up from 3.9 per cent a month earlier.
But investors focused on core inflation minus energy prices which was an expected 0.2 per cent month on month.
"It's not as bad as it looks. It's pretty concentrated in the energy sector," said Lindsey Piegza, FTN Financial market market analyst in New York. "What is scary is the year-over-year number. You never wants to see a 4 (per cent) handle."
Inflation worries currently preoccupy financial markets and were hitting stocks and bonds in Europe while boosting the dollar.
"Inflation is a major negative factor for equities," said Arthur van Slooten, strategist at Societe Generale, in Paris.
The FTSEurofirst 300 index of top European shares was down 0.2 per cent, well off its lows. It gained 0.9 per cent on Thursday, snapping a six-session losing run.
Earlier, Japan's Nikkei stock average rose 0.6 per cent, primarily on the view that exporters would benefit from a weaker yen if the US dollar rises.
Still, the benchmark Nikkei average posted its worst weekly fall in three months as worries about rising inflation and interest rate hikes dampened investor appetite.
The Nikkei ended the day up 85.13 points at 13,973.73. Over the week, it lost 3.6 per cent.
Crude oil was down slightly in the day but still above a heady US$135 a barrel.
The US dollar rose against the euro and the yen and was on track for its best week in over three years against a basket of currencies.
Traders were sensitive to comments from Group of Eight finance ministers meeting in Japan over the weekend.
"If the tone of (the G8) statement is unchanged from the last meeting when coordinated action was mentioned, this would give more support to the dollar," said Michael Klawitter, currency strategist at Dresdner Kleinwort in Frankfurt.
The US dollar index against major currencies was up 0.6 per cent at 74.269. It was up more than 2 per cent on the week and heading for its biggest weekly gain since April 2005.
The euro was down 0.8 per cent at US$1.5319, with losses exacerbated by the early indications from Ireland. A "no" vote could scupper EU reform plans.
The US dollar was up 0.3 per cent against the yen at ¥108.28. Inflation worries continued to hit fixed income. Reuters
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