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Stocks edge higher, dollar sags eyeing Fed pause
  + stars: | 2023-06-14 | by ( Yoruk Bahceli | ) www.reuters.com   time to read: +4 min
On an annual basis, consumer prices rose 4%, the smallest in more than two years, slowing from April's 4.9%. That has crystallised traders' views that the Fed is unlikely to hike rates later on Wednesday. S&P 500 futures and Nasdaq futures were both up 0.2%, setting Wall Street for further gains after U.S. stocks rallied to 14-month highs overnight. That supported the euro , which was up 0.1% to $1.0850, hovering just below Tuesday's three-week high of $1.08235. German two-year bond yields touched a fresh high since March ahead of Thursday's European Central Bank rates decision.
Persons: Richard McGuire, Jim Reid, Stocks, Yoruk Bahceli, Stella Qiu, Jacqueline Wong, Sharon Singleton, Chizu Organizations: Sterling, U.S . Federal, U.S, CPI, Nasdaq, Rabobank, Deutsche Bank, Bank of, Thursday's European Central Bank, Brent, International Energy Agency, Tokyo's Nikkei, Thomson Locations: London, Asia
Separately, two days of chaos in China's $21 trillion bond market ended on Friday after Beijing allowed money brokers to resume providing data to third-party platforms. Jeffrey Gundlach, CEO of DoubleLine Capital, said he considered selling Treasuries earlier in the week but the market was "wildly illiquid." Bond market volatility spikesKEEPING WATCHThe heightened volatility has caught the eye of officials who play a role in ensuring financial markets stability. Analysts noted that bond volatility was exceptionally high not only because of a flight to safe-haven government debt, but also due to a massive repricing of rate-hike expectations. "If liquidity is deteriorating due to wild swings in safe-haven markets, that has implications for the functioning of financial markets and broader economic stability."
The European Central Bank is expected to hike interest rates as the Euro zone tries to tackle mounting inflation. Investors are waiting to see the outcome of Thursday's European Central Bank meeting, which is expected to deliver a 75 basis point rate hike. The meeting should also signal the Bank's quantitative tightening plans as the bloc attempts to control its 10% inflation rate. U.S. stock futures rose early on Thursday morning as investors seemed to brush off disappointing results from Meta Platforms. Shares in the Asia-Pacific were mixed Thursday as investors digest economic data in the region.
European markets were on course to open Wednesday marginally lower, with corporate earnings season in full swing and a European Central Bank meeting ahead. However, banking stocks closed down 0.3% amid mixed earnings, with UBS beating market expectations but seeing profits slide. Deutsche Bank reported early Wednesday, and also surpassed analyst forecasts. Other European companies to report include Barclays, Standard Chartered , Mercedes Benz , Heineken and Reckitt Benckiser . Asia-Pacific markets were higher on Fed expectations and comments from the China Securities Regulatory Commission on creating a "regulated, transparent open, lively and resilient" market.
The yen held firm on the stronger side of 149 per dollar following two consecutive days of suspected Bank of Japan (BOJ) intervention straddling the weekend. Economists polled by Reuters expect the pace of rate increases to slow to 50 basis points in December, matching bets in money markets. At 149.00 yen, the dollar was down from the 32-year high of 151.94 on Friday that appeared to trigger successive bouts of BOJ intervention. Whatever the tactics, we still expect USD/JPY to recover within a few weeks after BOJ intervention ends." The ECB looks set to hike rates by 75 basis points on Thursday to try and rein in red-hot inflation.
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