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Hong Kong - Stocks advanced and index futures pointed higher in Europe and the US, while the euro came off a 14-month high ahead of the European Central Bank’s (ECB) policy meeting on Thursday.
The dollar edged higher after touching its lowest since September as the US health-care reform bill imploded, casting further doubt on President Donald Trump’s agenda. The pound was steady following its decline on a disappointing UK inflation print, while the Australian and New Zealand dollars strengthened.
Treasuries weakened and gold and oil fell, while Asian equity markets returned toward all-time highs after the S&P 500 Index and Nasdaq Composite climbed to record closes.
Investors are assessing whether earnings will be strong enough to warrant lofty prices and if economies can handle higher interest rates. The next clues come from central bank meetings in Japan and Europe this week and company results, including Morgan Stanley and Qualcomm.
The market-implied probability of a Federal Reserve rate hike by year-end has declined to about 40% from 60% on July 7, based on the current effective fed funds rate and the forward overnight index swap rate.
Here are some key upcoming events:
The ECB meets on Thursday. Bloomberg Intelligence expects no change then, and no rate increase before 2019. Reuters cited unidentified officials as saying the bank is keen to keep asset purchases open-ended. The Bank of Japan is forecast to stand pat at its meeting on Thursday.
Here are the main moves in markets:
Bonds and currencies
The euro was down 0.1% at $1.1546 as of 08:18. The currency on Tuesday climbed 0.7% to $1.1554, its highest since May 2016, amid speculation the ECB could signal its intent to scale back monetary stimulus. The pound was little changed at $1.3045 and the Bloomberg Dollar Spot Index was also steady after its 0.5% slide yesterday.
The yen was flat at ¥112.04/$. The yield on 10-year US Treasuries was up one basis point at 2.27%, though down seven basis points this week after dropping five basis points last week. The yield on 10-year Australian government bonds slid three basis points to 2.72%.
Stocks
Chinese shares led gains in Asia, with the Shanghai Composite Index rising 0.9%. Hong Kong’s Hang Seng Index was up 0.4%. Japan’s Topix Index swung between gains and losses, while South Korea’s Kospi Index was little changed.
Australia’s S&P/ASX 200 Index rose 0.9% as bank shares climbed. Analysts said new capital requirements looked fairly benign. More on that story here. Futures on the S&P 500 Index added 0.1% after the underlying gauge hit a record close at 2 460.61. Euro Stoxx 50 futures advanced 0.3% after the main index slid 1.1% the previous day.
Commodities
WTI crude slipped 0.4% to $46.21 a barrel on reports of an increase in US stockpiles. Gold dropped 0.2% to $1 239.47 an ounce. Iron ore futures jumped 4.1%, building on a 7% advance over Monday and on Tuesday.
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