2017-07-12 14:15

European Stocks Rise, Pound Falls; Focus on Yellen: Markets Wrap

Kai Pfaffenbacho („Reuters“/„Scanpix“) nuotr.

European equities rose and the pound slid as attention turned to central bank policy after markets were rattled by reports of Donald Trump Jr.’s contact with a Russian lawyer.

The pound dropped against G-10 peers following a report that Bank of England Deputy Governor Ben Broadbent said he wasn’t ready to support a rate hike. A gauge of the U.S. dollar was also lower for a third day and Treasuries rose. The yen gained for a second day and shares in Asia were mixed. Oil bounced on reports of a decline in stockpiles, though it remains in a bear market.

Investors are awaiting testimony from Federal Reserve Chair Janet Yellen and the start of corporate earnings season after markets were jolted Tuesday. The catalyst was the release of emails by Trump Jr. that said the Russian government backed his father’s presidential campaign and was trying to damage Hillary Clinton.

Fed Governor Lael Brainard signaled she’s comfortable about pushing ahead with plans to start shrinking the balance sheet soon. The Bank of Canada is expected to hike interest rates Wednesday, a chance to mark a concrete step in a tightening cycle by many of the developed world’s central banks.

Here’s what investors are watching:

Yellen gives testimony Wednesday and Thursday, with investors looking for guidance on when the Fed could start reducing its balance sheet. JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. report results this week. The U.K. is due to publish its Repeal Bill on EU membership this week.

These are the main moves in markets: Currencies

The pound was down 0.2 percent at 8:06 a.m. in London following a Press and Journal newspaper interview with the BOE’s Broadbent in which he said he’s not ready to support an increase in interest rates as there were “still a lot of imponderables.” The yen was up 0.4 percent at 113.53 per dollar as the greenback clawed back some lost ground that earlier saw it weaker against all G-10 peers. The Bloomberg Dollar Spot Index was down 0.1 percent. The Canadian dollar rose 0.1 percent, the euro was down 0.1 percent.

Stocks

The Euro Stoxx 50 gained 0.4 percent and the FTSE 100 rose 0.6 percent. S&P 500 futures were steady. Japan’s Topix Index lost 0.5 percent and Australia’s S&P/ASX 200 Index declined 1 percent. Hong Kong’s Hang Seng Index climbed 0.7 percent to above the key 26,000 mark, led by banks. Pakistan’s KSE100 dropped 1 percent after falling the most in three years on Tuesday, when investigators recommended a trial against Prime Minister Sharif and his two sons.

Bonds

The 10-year U.S. Treasury yield dropped one basis point to 2.36 percent. The yield on Australian 10-year bonds fell three basis points to 2.72 percent, halting five days of gains. The Bank of Japan raised outright purchases of 3-5 year government notes to contain a recent increase in medium-term yields.