Fresh signs that central banks could be backing away from easy-money policies helped boost the dollar, while investors sold shares of dividend payers like utilities and telecommunications companies that have been popular with income- seeking investors while rates have been low.
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The euro has slipped back slightly as the European Central Bank took a very steady-as-we-go attitude at its latest monthly meeting, failing to ease monetary policy any further or giving a clear signal of when this might take place. He also said the bank’s low rates were being more effectively transmitted through the banks and credit markets, meaning more effective stimulus.
Germany’s DAX fell 0.4 per cent, and France’s CAC 40 and Britain’s FTSE 100 were both down 0.3 per cent, while USA futures pointed to a fall of around 0.2 per cent at the open on Wall Street. The zero percent security due in August 2026 fell 0.526, or 5.26 euros per 1,000-euro ($1,121) face amount, to 99.902.
Asian markets were mostly lower Friday on disappointment about the European Central Bank’s decision to keep policy unchanged.
Thirty-year German yields soared more than 11 bps to 0.62 percent, and were on track for their biggest one-day rise in two months. ECB President Mario Draghi also seemed relatively confident about the economy and less inclined to hint at more stimulus than some analysts had expected. North Korea announced on Friday it had conducted its fifth nuclear test, hours after seismic monitors detected a blast near the secretive country’s nuclear test site.
North Korea’s nuclear test set off a blast that was more powerful than the bomb dropped on Hiroshima, with the nation saying it had mastered the ability to mount a warhead on a ballistic missile.
GDP growth for both 2017 and 2018 was revised down only a marginal 0.1 percentage point while inflation projections were revised down by 0.1% percentage point to 1.2% in 2017 but left unchanged at 1.6% in 2018.
ANALYST TAKE: “European markets are continuing where they left off, with the downbeat sentiment driven by ECB inaction dampening expectations of further easing in forthcoming meetings”, said Joshua Mahony, market analyst at IG.
Overnight on Wall Street, the S&P 500 lost 0.22 percent, weighed down by a 2.6 percent fall in Apple on disappointment over its latest iPhone, though gains in energy shares offset losses in most other sectors. Benchmark U.S. crude shed 60 cents to $47.02 a barrel in NY. However, the European Central Bank raised its forecast for 2016 growth from 1.6% to 1.7%.
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The rise in US bond yields widened the yield gap between the USA and Japan and lifted the dollar against the yen to 102.31 yen from around 101.60.
