Stocks near record highs, Sweden ends negative rates
World stocks drifted down from the week’s record highs on Thursday, while the crown gained as Sweden’s central bank became the first to raise interest rates from negative territory.
European equities were little changed in early trading. Britain’s pound recovered from the 3% loss it suffered as fear of a no-deal Brexit returned.
The pan-region STOXX 600 STXEc1 bobbed in and out of the red. Britain’s blue-chip index .FTSE managed a 0.15% rise before a Bank of England meeting.
Wall Street futures ESc1 suggested the S&P 500 would barely budge, after rising to a fifth consecutive record high on Wednesday. [.N] Earlier, Asian shares had pulled back from a one-and-a-half year peak as trading wound down before the end of the year.
Japan’s Nikkei .N225 fell 0.3% and China’s stocks slipped .CSI300 for the second session despite trade optimism. Australian shares ended 0.3% lower, led lower by mining stocks.
Investors were also watching proceedings in Washington, where the Democratic-led U.S. House of Representatives voted to impeach U.S. President Donald Trump for abuse of power and obstruction of Congress.
Market reaction was limited, since the Republican-controlled Senate is widely expected not to convict Trump and removed him from office.
In Sweden, the central bank raised its key rate to zero after five years in negative territory. Economists wondered whether Sweden’s hot-running economy would react badly and whether other sub-zero rate central banks in the euro zone, Japan, Denmark, Switzerland and Hungary would follow suit.
The crown rose 0.2%, a gain that had been widely flagged.
“At the end of the day, this market doesn’t look at macro and earnings, it just looks at monetary developments,” said Stéphane Barbier de la Serre, macro strategist at Makor Capital Markets. “If the market thinks central banks (globally) are done with being dovish then we would see some volatility.”
The British pound gained after suffering heavy losses on concern Britain could still crash out of the European Union without a trade deal in place when a transition period ends in December 2020.
Traders were also waiting for the Bank of England’s last policy meeting of the year. No change in policy is expected, but more policy-makers might signal they could vote for an interest rate cut next year.
Sterling GBP=D3 rose 0.2% to $ 1.3105 after falling more than 3%. It had reached an 18-month high on Dec. 13 after UK Prime Minister Boris Johnson’s Conservative Party won a majority in a general election.
Against the euro, it stood at 84.94 pence EURGBP=D3, close to its weakest since Dec. 4. [/FRX] British inflation remained at a three-year low in November, data had showed on Wednesday.
STAY EASY
Germany’s benchmark 10-year bond yield crept towards the six-month highs it touched last week, with bond traders focussed on the day’s central bank meetings.
After Sweden’s move, Norway kept its rates at 1.5% and reiterated it was likely to stay there for some time.
The Australian dollar jumped by 0.36% to $ 0.6879 after better-than-expected labour-market data made interest rate cuts less likely.
The yen JPY=EBS barely moved from 109.58 per dollar after the Bank of Japan kept its quantitative easing in place and issued a gloomier assessment on factory output.
In commodities, Brent crude LCOc1 dipped 0.1% to $ 66.10 per barrel. U.S. crude CLc1 also dipped 0.01% to $ 60.86 a barrel after U.S. government data showed a decline in crude inventories. <EIA/S>
Prices are likely to be supported by production cuts coming from the Organization of the Petroleum Exporting Countries and its allies, including Russia.
