News Column

World shares at new highs on US jobs growth; dollar gains

July 6, 2014

World shares were hovering around record highs on Thursday as markets prepared for a European Central Bank and US jobs data double-header.

Investors were subdued before the two events, both usually big market movers. Stocks, benchmark bonds and the euro and dollar all barely budged after an equally cautious day in Asia.

The ECB is expected to flesh out last month's aggressive easing plans, and forecasts are for non-farm payrolls to rise by more than 200,000 for a fifth straight month. That would bolster the view the world's largest economy is back on track after a difficult winter.

"The main thing today will be the non-farm payrolls," said Valentijn van Nieuwenhuijzen, the head of multi-asset funds at ING investment management."

"(President Mario) Draghi will be doing his best to make the ECB meeting a non-event, but after all the strong US data this week, the ADP, ISM, the car sales data, this could be the thing that finally convinces markets that they can't ignore it anymore."

European stocks inched up 0.3 per cent, heading for their third consecutive day of gains and keeping MSCI'sAll World index, which covers 45 countries, flush with Wednesday's latest record high.

The dollar was also up, copper on the London Metal Exchange hit its highest level since late February, and safe-haven gold was down amid a lull in tensions in Iraq and Ukraine.

"People were saying, 'What is cheap in the world?' They figured out the (growth-sensitive) metals were cheap and if things accelerated a little bit, why not take a position?" said analyst Dominic Schnider of UBS Wealth Management in Singapore.

Dollar, treasuries nudge higher

The ECB was not the only central bank in action on Thursday. Sweden's crown fell to a 3-1/2-year low against the euro as its central bank cut rates more than expected. The Australian dollar lost ground after the head of the RBA warned the currency may weaken.

The dollar held firm above a recent eight-week low as benchmark 10-year US treasury yields crept to a new 1 -week high of 2.62 per cent.

The euro was also hovering just below a six-week high at $1.3648 as German Bund yields nosed higher. The euro's strength is becoming a major thorn in the ECB's side, creating problems for both inflation and growth.

Early futures prices also pointed to minor gains on Wall Street later.

The US jobs data is being released on Thursday because US markets are closed for Independence Day on Friday, the day the report is usually released. It is due at 12.30 GMT. The ECB will release its rate decision at 11.45 GMT; a Press conference by Draghi is scheduled for 12.30 GMT.

Oil slips

In commodities, crude oil extended losses after falling the previous day on encouraging signs of supply from Libya and Iraq. Libya's acting prime minister Abdullah Al Thinni said the government had reached a deal with a rebel leader controlling oil ports to hand over a final two terminals that should end a blockade.

Brent crude was back below $110.50 for the first time in over two-weeks while safe-haven gold fell 0.3 per cent to $1,323.55 an ounce as it pulled back from a three-month high.

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Source: Khaleej Times (United Arab Emirates)

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