Indian Markets Continue to Climb, European Government Bond Yields at Lowest Since Napoleonic Wars
June 3, 2014 7:40 am
Equity markets in Europe have eased Tuesday morning, pausing for breath following recent strength which has seen major benchmarks trading at six-year highs. Price action so far suggests traders are expressing a degree of hesitation ahead of inflation data for the euro zone after German consumer prices missed expectations on Monday.
However, the expectation is that further decline in inflation may signal a stimulus response by the European Central Bank at Thursday’s policy meeting. Overnight, Asian equity markets traded broadly higher, sentiment being helped by data which showed that Chinese PMIs from HSBC Holdings and Markit Economics stood at 49.4 in May, up from 48.1 in April.
Although this outcome missed expectations, the reading does show an improvement in the survey as it edges closer to expansion territory near the 50 mark. Japanese equities extended their rally, helped by continued weakness in the yen. Elsewhere, the Australian dollar is up against the US dollar but the S&P/ASX 200 stock index lost 0.7% after the Reserve Bank of Australia left interest rates at 2.5% for the ninth month in a row and backed away from attempting to talk down the Aussie as some traders expected it might.
Over in India, the Sensex index is up 0.6% and on course for another record close as investors continue to celebrate the election win by the Bharatiya Janata Party and its leader Narendra Modi and after the Reserve Bank of India also maintained monetary policy. The attention this week will remain on central banks with the Bank of England and the ECB meeting on Thursday – the spotlight is on the latter. ECB head Draghi said last month he’s “comfortable” to act in June to expand the central bank’s easing policy, with markets waiting to see what form such an expansion will take.
The threat of deflation warrants action by the ECB – indeed, European government bond yields are at their lowest since the Napoleonic Wars, signalling that investors want more action from the ECB. Inflation data from the euro zone will therefore be very much in focus today, as well as a measure of unemployment in the euro area which is likely to show the jobless rate stood at 11.8 percent in April, unchanged from the previous month. Later in the session, we have US factory orders which are expected to show an increase of 0.5% in April, as well as the Non-Farm Payroll report, which is out on Friday. Last month’s non-farm payroll figures exceeded expectations by a wide margin, with the 288,000 figure far above the 215-220k predicted.
Equity markets in Europe have eased Tuesday morning, pausing for breath following recent strength which has seen major benchmarks trading at six-year highs. Price action so far suggests traders are expressing a degree of hesitation ahead of inflation data for the euro zone after German consumer prices missed expectations on Monday.
However, the expectation is that further decline in inflation may signal a stimulus response by the European Central Bank at Thursday’s policy meeting. Overnight, Asian equity markets traded broadly higher, sentiment being helped by data which showed that Chinese PMIs from HSBC Holdings and Markit Economics stood at 49.4 in May, up from 48.1 in April.
Although this outcome missed expectations, the reading does show an improvement in the survey as it edges closer to expansion territory near the 50 mark. Japanese equities extended their rally, helped by continued weakness in the yen. Elsewhere, the Australian dollar is up against the US dollar but the S&P/ASX 200 stock index lost 0.7% after the Reserve Bank of Australia left interest rates at 2.5% for the ninth month in a row and backed away from attempting to talk down the Aussie as some traders expected it might.
Over in India, the Sensex index is up 0.6% and on course for another record close as investors continue to celebrate the election win by the Bharatiya Janata Party and its leader Narendra Modi and after the Reserve Bank of India also maintained monetary policy. The attention this week will remain on central banks with the Bank of England and the ECB meeting on Thursday – the spotlight is on the latter. ECB head Draghi said last month he’s “comfortable” to act in June to expand the central bank’s easing policy, with markets waiting to see what form such an expansion will take.
The threat of deflation warrants action by the ECB – indeed, European government bond yields are at their lowest since the Napoleonic Wars, signalling that investors want more action from the ECB. Inflation data from the euro zone will therefore be very much in focus today, as well as a measure of unemployment in the euro area which is likely to show the jobless rate stood at 11.8 percent in April, unchanged from the previous month. Later in the session, we have US factory orders which are expected to show an increase of 0.5% in April, as well as the Non-Farm Payroll report, which is out on Friday. Last month’s non-farm payroll figures exceeded expectations by a wide margin, with the 288,000 figure far above the 215-220k predicted.
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