Euro Hurt By ECB Meeting Outcome; Markets Brace for U.S. Jobs Data
The Euro took a big hit by the ECB’s economic forecast slash, rate hike delay and new cheap bank loans on Friday morning as the market looks to the U.S. employment data to be released later in the day.
The Euro was struggling near a 21-month low against the dollar as the European Central Bank (ECB) meeting on Thursday concluded with a series of dovish signals including a downbeat attitude towards the economic growth. The common currency stood at 1.1201 against the dollar at 10:00 PM EST (03:00 AM GMT) after dipping to 1.1176, its lowest since June 2017.
“We are (in) a period of continued weakness and pervasive uncertainty,” said ECB President Mario Draghi.
Draghi said in a statement following the policy meeting that the ECB would launch a new series of quarterly targeted longer-term refinancing operations in September to help preserve favourable bank lending conditions and smooth transmission of monetary policy.
The ECB also plans to keep its key interest rates unchanged throughout 2019.
The news came in the same week that China cut its economic expansion target, the Bank of Canada lowered its expectations for policy tightening and the Organisation for Economic Co-operation and Development slashed its global outlook again, causing more concerns about the slowdown in the global economy.
The U.S. Dollar Index that tracks the greenback against a basket of six other major currencies dropped by 0.05% to 97.518.
U.S. non-farm payrolls for February, to be released later on Friday, will indicate the strength of the labour market.
Reuters says economists expect to see 180,000 jobs added in the country last month, after two months of staggering growth. The U.S. economy added 304,000 jobs in January and 222,000 in December.
“Whether the dollar can remain on an uptrend in the long-term is debatable, but for now a strong U.S. jobs report would provide further boost for the currency,” Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo, told Reuters.
On another note, Bloomberg reported on Wednesday that U.S. President Donald Trump is pushing U.S. negotiators to close a Sino-U.S. trade deal soon.
The USD/CNY pair inched up by 0.09% to 6.7190. The People’s Bank of China (PBOC) set the yuan reference rate at 6.7235 vs the previous day’s fix of 6.7110.
The USD/AUD pair lost 0.02% and stood at 1.4246. Australia’s GDP growth data came in at 0.2%, below the 0.3% expectation. The slower growth has contributed to the anticipation of a rate cut this year. The Australian dollar also took a hit last month after the RBA stepped back from a long-standing tightening bias.
Elsewhere, the USD/JPY pair was down 0.11% to 111.45 amid risk aversion in broader markets. Market turmoil tends to send the safe-haven yen up.
The USD/NZD pair also slid 0.12% to 1.4784.
BOJ’s ‘gradualism’ advocate says next move could be to ramp up stimulus
Rising global uncertainties could push Japan into recession and force the central bank to ramp up stimulus, the Bank of Japan’s former deputy governor Hirohide Yamaguchi said, reinforcing expectations an end to crisis-mode policies will remain distant.
Yamaguchi, who as a career central banker masterminded various monetary easing plans, said the BOJ’s policy tool-kit has become “quite small” after deploying a raft of radical measures to fire up inflation to its elusive 2 percent target.
But weakening global demand is hurting exports and the economy, he said, adding that the risk of Japan slipping into recession “isn’t small.”
The BOJ has said it will ease further only if the economy loses momentum to accelerate inflation to its target. Yamaguchi said the economy will indeed see such momentum weaken, thus forcing the central bank to top up monetary support.
“The BOJ will likely have to ponder additional easing at some point,” Yamaguchi told Reuters on Thursday before the European Central Bank’s policy meeting.
Given its dwindling ammunition, however, the central bank won’t act immediately to small changes in the economy, he added.
“It will act only when the economy is hit by a severe downturn, and when the momentum for hitting its price target is broken,” Yamaguchi said in his first interview with foreign media since retiring from the BOJ in 2013.
Trade tensions and slowing global growth have forced major central banks to pause in raising interest rates. The ECB on Thursday pushed out the timing of its first post-crisis rate hike, joining the U.S. Federal Reserve in putting tightening plans on hold.
Yamaguchi, who retains strong influence on and close contacts with incumbent BOJ policymakers, said any additional easing must be done in a way that does not expand too much the central bank’s already huge balance sheet.
“I think people at the BOJ are thinking of ways to do this,” he said. “The BOJ could reduce purchases of certain assets, while increasing buying of other assets,” said Yamaguchi, now chairman of private think tank Nikko Research Center.
On whether the BOJ could deepen negative rates or lower its long-term yield target if it were to ease further, Yamaguchi said: “I don’t think it’s absolutely impossible.”
Under a policy dubbed yield curve control (YCC), the BOJ now guides short-term rates at minus 0.1 percent and the 10-year bond yield around zero percent.
Even if the BOJ were to ramp up stimulus, it must be mindful of the need to eventually exit from ultra-loose policy, he said.
One way to make a future exit from easy policy smooth would be to offer more details now on the exit strategy, Yamaguchi said.
“It’s important to reveal the BOJ’s exit strategy when markets are calm and people believe the central bank won’t normalize policy any time soon,” he said.
Stock Market News
U.S. stocks lower at close of trade; Dow Jones Industrial Average down 0.78%
U.S. stocks were lower after the close on Thursday, as losses in the Consumer Services, Technology and Basic Materials sectors led shares lower.
At the close in NYSE, the Dow Jones Industrial Average lost 0.78%, while the S&P 500 index declined 0.81%, and the NASDAQ Composite index fell 1.13%.
The best performers of the session on the Dow Jones Industrial Average were Verizon Communications Inc (NYSE:VZ), which rose 1.11% or 0.62 points to trade at 56.30 at the close. Meanwhile, Exxon Mobil Corp (NYSE:XOM) added 1.11% or 0.88 points to end at 80.16 and Nike Inc (NYSE:NKE) was up 0.15% or 0.13 points to 85.26 in late trade.
The worst performers of the session were Walgreens Boots Alliance Inc (NASDAQ:WBA), which fell 2.14% or 1.31 points to trade at 59.79 at the close. Caterpillar Inc (NYSE:CAT) declined 1.51% or 2.03 points to end at 132.80 and 3M Company (NYSE:MMM) was down 1.45% or 2.94 points to 199.86.
The top performers on the S&P 500 were Electronic Arts Inc (NASDAQ:EA) which rose 4.84% to 99.36, CenturyLink Inc (NYSE:CTL) which was up 4.76% to settle at 12.11 and Allergan PLC (NYSE:AGN) which gained 3.99% to close at 143.00.
The worst performers were Kroger Company (NYSE:KR) which was down 9.95% to 25.61 in late trade, Mosaic Co (NYSE:MOS) which lost 4.48% to settle at 27.92 and Wynn Resorts Limited (NASDAQ:WYNN) which was down 3.95% to 118.67 at the close.
The top performers on the NASDAQ Composite were Bio Path Holdings Inc (NASDAQ:BPTH) which rose 223.29% to 38.860, Seelos Therapeutics Inc (NASDAQ:SEEL) which was up 96.13% to settle at 3.040 and GTX Inc (NASDAQ:GTXI) which gained 67.72% to close at 1.5400.
The worst performers were Synergy Pharmaceuticals Inc (NASDAQ:SGYP) which was down 52.00% to 0.030 in late trade, Aptevo Therapeutics Inc (NASDAQ:APVO) which lost 40.20% to settle at 0.885 and Evine Live Inc (NASDAQ:EVLV) which was down 24.73% to 0.331 at the close.
Falling stocks outnumbered advancing ones on the New York Stock Exchange by 2050 to 959 and 92 ended unchanged; on the Nasdaq Stock Exchange, 1748 fell and 889 advanced, while 86 ended unchanged.
Shares in Synergy Pharmaceuticals Inc (NASDAQ:SGYP) fell to all time lows; falling 52.00% or 0.033 to 0.030. Shares in Aptevo Therapeutics Inc (NASDAQ:APVO) fell to all time lows; down 40.20% or 0.595 to 0.885. Shares in Evine Live Inc (NASDAQ:EVLV) fell to 5-year lows; losing 24.73% or 0.109 to 0.331.
The CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was up 11.27% to 16.59 a new 1-month high.
Gold Futures for April delivery was up 0.03% or 0.45 to $1286.45 a troy ounce. Elsewhere in commodities trading, Crude oil for delivery in April rose 0.12% or 0.07 to hit $56.48 a barrel, while the May Brent oil contract rose 0.08% or 0.05 to trade at $66.07 a barrel.
Tesla makes deal with Chinese lenders for Shanghai Gigafactory
Tesla Inc. reached an agreement with lenders in China to receive as much as a half-billion dollars to invest in its Shanghai factory currently under construction.
The electric-car maker said in a securities filing Thursday that a syndicate of lenders agreed to provide up to 3.5 billion yuan ($521 million) for construction and production expenses at its so-called Gigafactory Shanghai. Tesla’s lenders in the agreement are China Construction Bank Corp. 0939, -2.54% , Agricultural Bank of China Ltd. 1288, -2.63% , Industrial and Commercial Bank of China Ltd. 1398, -2.80% , and Shanghai Pudong Development Bank Co. 600000, -3.20% .
Tesla TSLA, +0.13% said it entered into the agreement for an unsecured 12-month term loan earlier this month.
Construction of what is to be the first foreign-owned car plant in China in China — and Tesla’s first massive Gigafactory outside of the U.S. — began in January. The plant, at a roughly 210-acre site east of downtown Shanghai, is crucial to the California company’s goal to scale up production in China. Tesla expects to begin production of the Model 3 sedan for the local market by the end of this year, targeting 10,000 vehicles a week, and mass production by next year.
Crypto Mixed; France Suggests Ban on Privacy Coins
With regulations on cryptocurrencies being formulated and suggested around the world, prices of major digital coins were mixed on Friday morning in Asia.
Bitcoin slid 0.07% to 3,876.9 by 10:24 PM ET (03:24 AM GMT). The coin still lingered at one-week highs after surviving a mid-week dive to around $3,700.
Ethereum also went down 13.64% to $135.97, and XRP traded 1.72% lower to $0.31167 over the last 24 hours.
Litecoin was the only gainer, increasing 0.09% to 55.92. Going full steam, the coin has surged 22.14% over the past week.
The crypto market cap stayed flat at around $133 billion. It added $7 billion so far from the beginning of this week.
The most notable news in the industry this morning was France’s announcement that it might push forward a ban on anonymous cryptocurrencies.
Eric Woerth, the head of the Finance Committee of France’s National Assembly, proposed a ban on these private coins.
“It would also have been appropriate to propose a ban on the dissemination and trade in [cryptocurrencies built] to ensure complete anonymity by preventing any identification procedure by design,” said Woerth.
He cited private coins such as Monero, PIVX, DeepOnion, Zcash, saying the purpose of creating these coins is to bypass any possibility of identifying the holders. He said “regulation has not gone that far.”
Japanese regulators made a similar move last April, when they suggested a ban on trading anonymity-oriented altcoins Dash and Monero.
France is not considered crypto-friendly, at least to date. Last year, French parliament blocked amendments to ease crypto-related taxation, and its central bank would not support tobacco kiosks’ sale of Bitcoin.
In other news, Israel’s securities regulators published final recommendations on crypto regulation that suggested disclosure requirements for crypto offerings that qualify as securities. The regulators said that such offerings should be controlled like crowdfunding.
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