European Shares Hold Steady At Midday Ahead Of ECB Meeting

Posted - April 27 2018 05:13

European Shares Hold Steady At Midday Ahead Of ECB Meeting

With eurozone growth still strong by historical standards, most economists expect the European Central Bank to phase out its bond purchases by December - four years after the Federal Reserve halted its own QE program - and to start raising interest rates late next year.

ECB President Mario Draghi is scheduled to hold a news conference Thursday. The currency is up 1.5% against the dollar this year and just 0.3 percent higher on a trade-weighted basis.

Asia also rose overnight as record quarterly profits from Samsung helped offset nerves in China after reports that US prosecutors have been investigating whether Chinese tech giant Huawei violated Iran sanctions.

"But with Treasury yields rising, people are worrying we may be peaking on profits, or if GDP growth is peaking and we are now in a situation where markets are getting very nervous", he said, noting the U.S. Federal Reserve appeared to be in no mood to brake its rate-hike program.

"The worry is about an overheating, leading to a rise in inflation, higher interest rates which bring on a textbook recession".

On Wednesday, the U.S. Dow Jones benchmark snapped a five-day losing streak thanks to more strong corporate earnings.

Deutsche Bank was up about half a percent, giving up some early gains.

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Elsewhere Sweden's crown, one of the worst performing G10 currencies in 2018, fell after its central bank kept interest rates unchanged and said continued monetary support was needed given inflation remained weak.

Regarding non-standard monetary policy measures, the European Central Bank reaffirmed the decision made at the last governing council meeting, that it will continue to make net asset purchases at a monthly pace of 30 billion euro from January 2018 until the end of September 2018, or beyond, if necessary.

The governing council has confirmed that the net asset purchases, at the current monthly pace of €30 billion, will continue until the end of September 2018, or beyond, if necessary, and in any case until the need for a sustained adjustment consistent with its inflation aim is felt.

"The risk is that he is less dovish than expected", Green added.

That could lift the euro which has sold off in recent days against the dollar to approach its March 1 level of $1.2154. The yield on 10-year German government bonds slid to 0.59%.

Innes added that with equity market sentiment holding steady despite growing bond yields, the dollar could move through G-10 currency markets like a wrecking ball.

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