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Dubai - The dollar rose and the euro strengthened as central banks dominated markets on Thursday. Metals deepened their losses, while oil gave up early gains to extend its retreat.
Investor conviction that the Federal Reserve will raise US borrowing costs when it meets next week helped propel the Bloomberg Dollar Spot Index toward its best back-to-back weeks since December.
The euro rose before Thursday’s European Central Bank meeting, where no change in monetary policy is expected. Crude couldn’t sustain a bounce after yesterday’s slump, and West Texas Intermediate dropped below $50 per barrel as commodity producers dragged European stocks lower.
As a string of indicators from improving US jobs data to rising euro-area inflation points to strengthening global growth, investors are positioning for higher US interest rates and looking for signs of an end to European stimulus.
While economists surveyed by Bloomberg predict the ECB will reiterate that its monthly bond-buying program will run until at least December, traders will be on alert for a more hawkish tone from President Mario Draghi.
“Despite the positive outlook, risks remained skewed to the downside for now,” Anna Stupnytska, global economist at Fidelity International, said in a note. “A Brexit related slowdown could spill over via trade links, with Germany being particularly vulnerable. The heavy political timetable, with Dutch elections later this month and French presidential elections” starting in April are also reasons for ECB caution, she said.
What’s ahead for the markets:
Mario Draghi is expected to keep QE going until the end of the year with underlying price pressures muted. The ECB’s policy decision will be announced at 13:45 and Draghi will hold a press conference 45 minutes later.
Official US jobs data for February are due Friday. Employers probably added around 200 000 workers to payrolls, in line with the average over the past six months and a sign of steady job growth, economists forecast.
Here are the main moves in markets:
Asia
Declines in Asia were led by the Hang Seng China Enterprises Index in Hong Kong, which fell the most since December 15. Japanese equities gained, supported by a weaker yen. The yuan reversed losses after hitting its weakest against the dollar in two months.
Stocks
The Stoxx Europe 600 Index retreated 0.4% as of 13:03, with energy companies and miners posting declines. Futures on the S&P 500 fell 0.1% after the benchmark index lost 0.2% on Wednesday.
Currencies
The Bloomberg Dollar Spot Index rose 0.1% after gaining 0.4% on Wednesday. The British pound fell 0.1% as the euro added 0.2%.
Bonds
Yields on 10-year US Treasuries traded fractionally higher at 2.5616 percent after adding 25 basis points over the past eight days. German bonds were choppy ahead of the ECB meeting.
French bonds dropped at the open, leading to some speculation Asian investors were selling the debt, given the timing. Losses pared as focus turned to the latest Harris poll, showing Emmanuel Macron overtaking Marine Le Pen in the first round of the French presidential election. Peripheral bonds were steady.
Long-dated Italian bonds slid after yesterday’s auction announcement for next week, which include 15- and 30-year bonds.
Commodities
WTI crude dropped 2.8% to $48.86 a barrel. It tumbled more than 5% the previous session to the lowest close since December 7. Gold fell 0.3% to $1 205.25 an ounce, declining for a fourth day.
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