European Central Bank again eyes jumbo rate hike to 'tame inflation beast'

BRUSSELS - The European Central Bank is expected to set aside recession worries and deliver another jumbo interest rate hike this week to cool inflation, as Russia's war on Ukraine sends energy prices soaring.

Inflation in the 19-nation eurozone climbed to an all-time high of nearly 10 percent in September, five times the ECB's target of two percent.

The ECB's governing council last month raised its key interest rates by an unprecedented 75 basis points, and many observers expect it to repeat the move at Thursday's meeting.

Households and businesses are bracing for a grim winter as Russia continues to squeeze gas supplies to Europe, raising fears of energy shortages and high electricity and heating bills.

The war has also pushed up food costs, while pandemic-era supply chain snarls combined with higher manufacturing costs have added to price pressures on a range of goods.

"Those who thought inflation was dead now know better," said Joachim Nagel, the head of Germany's Bundesbank central bank.

"Now the beast has woken up from its slumber... it's up to monetary policymakers to tame it again," he recently told students at Harvard University.

Like other central banks, the ECB is using a series of rate hikes to bring inflation under control -- at the risk of slowing economic activity to such an extent that it triggers a downturn.

"The 75 basis point rate hike looks like a done deal," said ING economist Carsten Brzeski.

"The ECB has turned a blind eye on recession risks," he added.

Analysts from Capital Economics said they saw the ECB going even bigger, predicting a 100 basis-point jump followed by smaller hikes over the coming months.

In the United States, where inflation is running at a 40-year high, the Federal Reserve recently said there was no "painless" way to combat runaway prices.

A slowdown of economic growth and the US job market will be "required" to bring down inflation, said the Fed, which has hiked rates faster and more aggressively than the ECB.

ECB president Christine Lagarde has warned that the euro area was also facing "a significant slowdown".

If Russia completely cuts off gas flows to Europe, the eurozone economy could shrink by nearly one percent in 2023, ECB vice-president Luis de Guindos added.

It's a scenario that has become more likely after Russia in late August halted gas flows through the crucial Nord Stream 1 pipeline to Europe's biggest economy, Germany.

The German economy, whose energy-hungry industries relied heavily on Russian gas before the war, is now forecast to shrink by 0.4 percent in 2023.

Chancellor Olaf Scholz has unveiled a 200-billion-euro ($197 billion) energy fund to help citizens cope with price shocks, irking European neighbors who can't afford the same fiscal largesse.

With other eurozone countries such as France and Spain also rolling out support measures, the ECB has warned governments not to fall into the trap of spending so much that they boost inflation.

Germany's hawkish Finance Minister Christian Lindner agreed, saying last week that fiscal policy "must not counter the measures of central banks" by strengthening demand.

The ECB is also expected to use this week's meeting to discuss bringing other monetary policy levers in line with its inflation-busting efforts.

Policymakers are likely to consider changes to the super cheap, long-term loans (TLTROs) offered to banks in recent years to help the eurozone through several crises -- sometimes at negative rates.

As a consequence of the ECB's rapid rate hikes since July, lenders can now make a profit by parking their excess TLTRO cash at the central bank and pocketing the new, higher deposit rate -- leaving the ECB looking for ways to incentivize early repayment of the loans.

The ECB may also ponder how best to shrink its multi-trillion-euro balance sheet, after years of hoovering up government and corporate bonds to drive up stubbornly low inflation.

But given the uncertain outlook and the risk of rattling financial markets, analysts say the start of any "quantitative tightening" is some way off.

Agence France-Presse

ECB poised for big rate hike in face of record inflation

FRANKFURT, Germany - After raising interest rates for the first time in over a decade at their last meeting, European Central Bank policymakers are poised to deliver another bumper hike on Thursday in a show of determination to tame soaring inflation.

Steep increases in the price of energy in the wake of the Russian invasion of Ukraine have heaped pressure on households and sent the pace of consumer price rises to new highs. 

Eurozone inflation hit 9.1 percent in August, a record in the history of the single currency and well above the two-percent rate targeted by the ECB.

Meanwhile on Monday, the euro fell to a 20-year low against the dollar Monday, dropping below $0.99 as fears of a eurozone recession grew.

The ECB was unlikely to raise its rates "with the explicit goal of strengthening the currency", said Frederik Ducrozet, head of macroeconomic research at Pictet, but the euro's struggles against the greenback could "have some bearing on its decision-making".

The Frankfurt-based institution is playing catch-up with other central banks in the United States and Britain that started raising rates harder and faster in response to inflation.

The "only question" for the ECB's meeting this week was "whether it will be a 50 or 75 basis point hike," said Carsten Brzeski, head of macro at the ING bank.

Speaking at the annual Jackson Hole central banking symposium at the end of August, ECB board member Isabel Schnabel said the central bank needed to show "determination" to tame price rises.

Under this approach, the central bank would respond "more forcefully to the current bout of inflation, even at the risk of lower growth and higher unemployment", she said.

In her speech in the US, Schnabel stressed the need for the people to "trust" that the ECB will restore their purchasing power.

The ECB's 25-member governing council surprised with a 50-basis-point hike at its last meeting in July, bringing an end to eight years of negative interest rates in one fell swoop.

So-called forward guidance issued by the ECB, which limited its scope for action, has been ditched. Policymakers would now take their decisions "meeting-by-meeting", the ECB President Christine Lagarde announced in July.

With that, the door has been opened for the ECB to follow in the footsteps of the US Federal Reserve and raise rates by a 75 basis points.

Following August's red-hot inflation numbers, the influential head of the German central bank, Joachim Nagel, said the ECB needed a "strong rise in interest rates in September".

"Further interest rate steps are to be expected in the following months," the Bundesbank president predicted.

But the ECB's chief economist, Philip Lane, has counselled colleagues to follow a "steady pace" of interest rate rises.

Hiking at a rate that was "neither too slow nor too fast" was important due to the "high uncertainty" around the economy and the future path of inflation.

Alongside its policy decisions, the ECB will also share an updated set of economic forecasts for the eurozone.

In its last estimates, published in June, the ECB said it expected inflation to sit at 6.8 percent in 2022 before falling to 3.5 percent next year, while growth would slow from 2.8 percent this year to 2.1 in 2023.

But a more severe energy shock as Russia reduces gas deliveries to Europe could push the eurozone into a "deeper winter recession" and hold growth to zero percent in 2023, said Ducrozet.

At the same time, the soaring cost of energy would drive inflation close to double digits by the end of the year, he predicted.

The ECB had "no choice but to commit to faster monetary tightening as long as inflation keeps rising" even as a recession loomed, said Ducrozet. 

Agence France-Presse

European Central Bank signals rate hike as soon as July to combat inflation

FRANKFURT, Germany - European Central Bank chief Christine Lagarde hinted Wednesday at a first interest rate hike in July to tackle soaring inflation, echoing the actions of other major central banks and heralding the end of the eurozone's cheap money era.

The ECB should end its bond-buying stimulus "early in the third quarter" and could raise interest rates "only a few weeks" later, Lagarde said in a speech in the Slovenian capital Ljubljana. 

The comment is the clearest sign yet from Lagarde that the ECB is ready to move on rates sooner rather later, as the institution trails rate hikes made by the US Federal Reserve and others to tame global inflation.

Any hike would be the ECB's first in over a decade and would lift rates from their current historically low levels.

These include a minus 0.5 deposit rate which effectively charges banks to park their excess cash at the ECB overnight.

Inflation in the eurozone climbed to 7.5 percent in April, an all-time high for the currency club and well above the ECB's own two-percent target.

The surge, driven in no small part by steep increases in prices for energy due to the Russian invasion of Ukraine, has strengthened calls for the ECB to follow its peers towards hikes. 

ECB policymakers will decide their course of action in upcoming June 9 and July 21 meetings, with the July date now seen as the most likely opportunity for a rate announcement.

- Rate rise -

At its last meeting in April, the ECB's governing council resolved to end its vast monthly bond purchases "in the third quarter".

Over recent years, the scheme has hoovered up billions of euros in government and corporate bonds each month to stoke economic growth and keep credit flowing in the 19-nation currency club.

The ECB should draw a line under it "early" in the third quarter, which starts in July, Lagarde specified on Wednesday.

Ending net purchases under the programme would open the door to an interest rate rise that could follow "only a few weeks" after, she said. 

After the initial move the process of monetary policy "normalisation", taking interest rates out of negative territory, would be "gradual".

- July pressure -

"To sum up Lagarde's speech: first rate hike on July 21," Carsten Brzeski, head of macro at ING bank, said on Twitter.

Decisions by the Fed and the Bank of England to raise rates aggressively to counter inflation have added to the pressure on the ECB to act.

German central bank president Joachim Nagel said Tuesday he "will advocate a first step normalising ECB interest rates in July".

The call made by the head of the traditionally conservative Bundesbank has been echoed by other members of the governing council.

On Wednesday, the head of the French central bank Francois Villeroy de Galhau also said the ECB would "progressively raise rates from the summer" to steer inflation towards the ECB's two-percent target. 

The central bank is set to ratchet up interest rates at a delicate moment for the economy.

The war in Ukraine has both pushed up prices and added to supply chain disruptions, putting further strain on households and businesses.

In response to the invasion, the European Union has sought to reduce its reliance on Russian energy imports and is in discussions over an embargo of Russian oil that would add to the economic stress.

The ECB would raise its rates in July "followed by a return to zero in September" Gilles Moec, chief economist at Axa insurance, told AFP.

But "between the war in Ukraine, a complicated coronavirus situation in China", which has seen a series of lockdowns and spillovers from rate hikes in the United States, the ECB will not be able to "pursue normalisation easily", Moec said.

Agence France-Presse

Gas supply shock would cut value of Europe's economy, ECB says

FRANKFURT - A negative shock from any gas supply disruption would eat into the value of goods and services produced in the euro zone, the European Central Bank said on Tuesday, worsening the impact of high energy prices on the bloc's growth.

Record energy prices in response to concern a Russian attack on Ukraine will lead to disruption of fuel exports to Europe have dented euro zone growth. Russia denies any plan to invade.

In an Economic Bulletin article on Tuesday, the ECB said it expected high energy prices would reduce euro zone economic output by around 0.2 percent this year, compared with baseline levels of GDP, with the biggest impact in the first quarter.

Over 90 percent of the gas used in the euro zone is imported, the ECB said, meaning negative economic impacts would be aggravated if the bloc loses some of its gas supply.

"The direct and indirect impact of a hypothetical 10 percent gas rationing shock on the corporate sector is estimated to reduce euro area gross value added by about 0.7 percent," the bank said.

The actual fall could even be greater as the modeling does not consider the effect of energy price changes, the ECB said.

Austria and Slovakia would take the biggest hit, the ECB said, while among industrial sectors, basic metals would likely suffer the most.

(Reporting by Balazs Koranyi; editing by Barbara Lewis)

-reuters-

Global central banks pull out all stops as coronavirus paralyses economies

SYDNEY - The US Federal Reserve and its global counterparts moved aggressively with sweeping emergency rate cuts and offers of cheap dollars to help combat the coronavirus pandemic that has jolted markets and paralysed large parts of the world economy. 

The coordinated response from the Fed to the European Central Bank (ECB) and the Bank of Japan (BOJ) came amid a meltdown in financial markets as investor anxiety deepened over the difficulty of tackling a pathogen that has left thousands dead and put many countries on virtual lockdowns.

The Fed moved first on Sunday, cutting its key rate to near zero in a move reminiscent of the steps taken just over a decade ago in the wake of the financial crisis.

The U.S. decision triggered emergency policy easings by central banks in New Zealand, Japan and South Korea, with Australia also joining with a liquidity injection in a coordinated move aimed at stabilising confidence as the pandemic threatened a global recession.

"The virus is having a profound effect on people across the United States and around the world," Fed Chair Jerome Powell said in a news conference after cutting short-term rates to a target range of 0% to 0.25%, and announcing at least $700 billion in Treasuries and mortgage-backed securities purchases in coming weeks.

The Reserve Bank of New Zealand (RBNZ) slashed rates to a record low as markets in Asia opened for trading this week, while Australia's central bank pumped extra liquidity into a strained financial system and said it would announce more policy steps on Thursday.

Later, the Bank of Japan too eased policy in an emergency meeting, ramping up purchases of exchange-traded funds (ETFs) and other risky assets to combat the widening economic fallout from the coronavirus epidemic.

Neighbouring South Korea stepped in as well with a 50 basis point rate cut in a rare inter-meeting review on Monday.

"I don't think we have reached a limit on how deep we can cut interest rates," BOJ Governor Haruhiko Kuroda said.

"If necessary, we can deepen negative rates further," he added.

"We can continue to pump ample liquidity into the market."

MARKETS RATTLED

The measures did little to calm market nerves though, as Asian shares and U.S. stock futures plummeted, underscoring the fears the health crisis might prove much more damaging to the global economy than initially anticipated.

France and Spain joined Italy in imposing lockdowns on tens of millions of people, while the United States saw school closings, runs on grocery stores, shuttered restaurants and retailers, and ends to sports events.

"Market reactions to each surprise monetary policy easing have been sell first and ask questions later," said Selena Ling, head of treasury research and strategy at OCBC Bank in Singapore.

"The more unprecedented measures by the Fed and other central banks, the more investors worry if (they) know something we don’t... fear remains the crux of the problem here as market players remain unconvinced that monetary policy easing and liquidity injections will solve an essentially healthcare crisis."

Five other central banks cut pricing on their swap lines to make it easier to provide dollars to their financial institutions, ramping up efforts to loosen gummed up funding markets and calm credit markets. They also agreed to offer three-month credit in U.S. dollars on a regular basis and at a rate cheaper than usual.

The move was designed to bring down the price banks and companies pay to access U.S. dollars, which has surged in recent weeks as a coronavirus pandemic spooked investors.

However, analysts say flooding banks with cash at near-zero rates won't help fix dislocations in credit markets caused by fear of lending to businesses with mounting losses, which in turn fuels distrust among banks.

Moreover, analysts at major banks and ratings agencies are predicting a marked downturn in the world economy, and some say a recession is unavoidable.

"We believe that financial markets stress could ultimately be the proverbial 'straw that breaks the camel’s back’, and hence, we continue to monitor these very closely," Fitch Solutions said in a note on Monday, adding its forecasts were subject to "downside risks."

"While we expect to see more major central banks cut interest rates further in a bid to support growth...there are limits to how low they can go."

The People's Bank of China (PBoC), which has rolled out powerful stimulus measures since the outbreak began in the country's Hubei province late last year, was a bit of an outlier as it kept its rates steady, though analysts expected a cut later this week.

(Additional reporting by Winni Zhou and Tom Westbrook; Editing by Shri Navaratnam)

ECB pumps up bank lending, bond buys to cushion virus impact

FRANKFURT AM MAIN, Germany - The European Central Bank on Thursday followed other major central banks with a flurry of measures to cushion the impact of the coronavirus, including increased bond purchases and cheap loans to banks, but surprised observers by leaving key interest rates unchanged.

Policymakers agreed a new round of cheap loans to banks, known as long-term refinancing operations (LTROs) "to provide immediate support to the euro area financial system," a spokesman said.

They also eased conditions on an existing "targeted" LTRO program, aiming to "support bank lending to those affected most by the spread of the coronavirus, in particular small- and medium-sized enterprises."

And the ECB will pile an extra 120 billion euros ($135 billion) of "quantitative easing" asset purchases this year on top of its present 20 billion per month.

The "quantitative easing" (QE) scheme will include "a strong contribution from the private sector," the ECB said, as room to buy government debt while respecting self-imposed limits has grown tight.

On top of the monetary measures, the ECB's banking supervision arm said it would allow banks to run down some of the capital buffers they must build up in good times to weather crises.

Its teams supervising individual lenders may provide more flexibility to institutions under their remit, such as giving them more time to patch up shortfalls in their risk management, while a broader range of assets will count towards the watchdog's capital requirements.

President Christine Lagarde will be on the spot to explain the measures to journalists at a 2:30 pm (1330 GMT) press conference.

Stock markets had plunged again early Thursday on President Donald Trump's announcement that travelers from much of Europe would be barred from entering the US, after a Monday rout triggered by an oil price war combining with virus fears.

Losses on European stock indices deepened after the ECB's announcement, with analysts citing disappointment at its decision to leave the key interest rate untouched.

But they also said that the scope for the central bank to lift the markets' mood was always going to be limited.

"We do not think the ECB will be able to change investor sentiment... What matters for the economy is the trajectory of the virus itself and the measures which national authorities take to contain it," Andrew Kenningham of Capital Economics commented.

- Paying banks to lend -
Ahead of Thursday's meeting, analysts had highlighted tweaks to the ECB's bank lending scheme in particular as a critical tool for virus response.

"Bravo!" Pictet Wealth Management analyst Frederik Ducrozet tweeted after the statement, hailing the ECB's "bold decisions".

Ducrozet noted that under the changes to the TLTRO program, lenders that loan the cash they get from the central bank on to the real economy will enjoy an interest rate potentially as low as -0.75 percent.

At 0.25 percentage points below the rate the ECB charges on banks' deposits in Frankfurt, the difference represents an effective subsidy to the financial system.

Meanwhile, the central bank dispensed with what many expected would be a purely symbolic interest rate cut of just 0.1 or 0.2 percentage points.

The US Federal Reserve last week and Bank of England on Tuesday had space to cut interest rates by half a percentage point each to ease financial conditions.

But the ECB's already-negative deposit rate robbed it of that option.

"Forget rates," Allianz chief economist Ludovic Subran tweeted ahead of the meeting.

"All eyes (are) on real measures to immunize the financial system" such as changes to the bank lending schemes and supervisory rules.

Later Thursday, Lagarde will likely reinforce the ECB's long-standing call on governments to do more with their fiscal powers to buttress the eurozone economy.

In a conference call Tuesday with European heads of government, the former International Monetary Fund (IMF) head "drew comparisons with past crises" like the 2008 financial crisis, a European source told AFP.

Such past trials were overcome by central banks and governments working in concert.

In mid-February, Lagarde reiterated that "monetary policy cannot, and should not, be the only game in town" to stimulate the economy.

Italy on Wednesday announced 25 billion euros of support to its economy and the European Union has also mobilized up to 25 billion euros.

Chancellor Angela Merkel even signalled Wednesday that Germany could abandon its balanced-budget dogma.

source: news.abs-cbn.com

ECB cuts key rate, to restart bond purchases

FRANKFURT - The European Central Bank approved a fresh stimulus package as expected on Thursday, cutting interest rates and approving a new round of bond purchases to prop up eurozone growth and halt a worrisome drop in inflation expectations.

The ECB cut its deposit rate to a record low -0.5 percent from -0.4 percent and will restart bond purchases of 20 billion euros a month from November, it said in a statement.

With inflation falling, Germany skirting a recession and a global trade war sapping domestic confidence, the ECB had all but promised more support to the economy and the only question was how extensive stimulus would be.

"The Governing Council expects (bond purchases) to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates," the ECB said in a regular policy statement.

The ECB also eased the terms of its long term loans to banks and introduced a tiered deposit rate to help banks.

Economists polled by Reuters expected a 10 basis point deposit rate cut, a tiered deposit rate to support banks, bond buys of 30 billion euros a month from October and a fresh promise to keep rates low for longer.

"The Governing Council now expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2 percent within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics," the ECB said.

Attention now turns to ECB President Mario Draghi's 1230 GMT news conference, at which he will also present fresh growth and inflation projections.

(Reporting by Balazs Koranyi, Francesco Canepa and Michelle Martin; Editing by Catherine Evans)

source: news.abs-cbn.com

Asia stocks nurse losses, bonds hold huge gains

SYDNEY -- Asian shares were heading for weekly losses on Friday as conflicting messages on the Sino-US trade war only added to worries for the global economy, while talk of aggressive central bank stimulus drove bond yields to fresh lows.

US President Donald Trump said on Thursday he believed China wanted to make a trade deal and that the dispute would be fairly short.

Beijing on Thursday vowed to counter the latest tariffs on $300 billion of Chinese goods but called on the United States to meet it halfway on a potential trade deal.

With no settlement in sight, investors chose discretion over valor. MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.17 percent, to be down 1.4 percent for the week.

Japan's Nikkei fell 0.5 percent, making a loss of 1.8 percent on the week, while commodity-exposed Australia was heading for a weekly drubbing of 2.7 percent.

E-Mini futures for the S&P 500 did rise 0.24 percent, but were still off 2.2 percent on the week so far. Overnight, the Dow rose 0.39 percent, while the S&P 500 0.25 percent and the Nasdaq dropped 0.09 percent.

The spectacular rally in bonds remained the main investor focus. Yields on 30-year paper hit an all-time low of 1.916 percent to be down 27 basis points for the week, the sharpest such decline since mid-2012.

That meant investors were willing to lend the government money for three decades for less than the overnight rate.

Such is the gloom that surprisingly strong US retail sales came and went with no impact on the bond rally.

Analysts have cautioned that the current bond market is a different beast than in the past and might not be sending a true signal on recession.

"The bond market may have got it wrong this time, but we would not dismiss the latest recession signals on grounds of distortions," said Simon MacAdam, global economist at Capital Economics.

"Rather, it is of some comfort for the world economy that unlike all previous U.S. yield curve inversions, the Fed has already begun loosening monetary policy this time."

CAVALRY COMING

Indeed, futures imply a one-in-three chance the Federal Reserve will chop rates by 50 basis points at its September meeting, and see them reaching just 1 percent by the end of next year.

There were plenty of other signs the cavalry were coming. European Central Banker Olli Rehn on Thursday flagged the need for a significant easing package in September.

Markets are keyed for a cut in the deposit rate of at least 10 basis points and a resumption of bond buying, sending German 10-year bund yields to a record low of -0.71 percent.

"Notions that the package will include a revamped QE program also saw a sharp rally in Italian, Spanish and Portuguese debt," said Tapas Strickland, a director of economics at National Australia Bank.

"If the ECB undertakes such substantive stimulus, it is unlikely to do so alone given the upward pressure it would put on the US dollar."

Mexico overnight became the latest country to surprise with a cut in rates, the first in five years.

Canada's yield curve inverted by the most in nearly two decades, piling pressure on the Bank of Canada to act.

All the talk of ECB easing knocked the euro back to $1.1108 and away from a top of $1.1230 early in the week. That helped lift the dollar index up to 98.164 and off the week's trough of 97.033.

The dollar could make little headway on the safe-haven yen, though, and faded to 106.08 yen.

The collapse in bond yields continued to make non-interest paying gold look relatively more attractive and the metal held firm at $1,524.90, just off a six-year peak.

Oil prices were trying to bounce after two days of sharp losses. Brent crude futures added 23 cents to $58.46, while U.S. crude rose 33 cents to $54.80 a barrel.

source: news.abs-cbn.com

Going negative? As trade war rages, central banks ponder radical steps

TOKYO/WELLINGTON -- Negative interest rate policy - an unconventional gambit once only considered by economies with chronically low inflation such as Europe and Japan - is becoming a more attractive option for some other central banks to counter unwelcome currency rises.

In Asia, central banks in economies as diverse as Australia, India and Thailand have stunned markets by cutting aggressively rates in response to the broadening fallout from the US-China trade war.

The Reserve Bank of New Zealand (RBNZ) - considered a pioneer in central bank policymaking circles since it adopted inflation-targeting nearly 3 decades ago - floated the possibility of negative rates last week as it, too, slashed rates by a bigger-than-expected 50 basis points and sent its currency tumbling to 3-1/2-year lows.

The fact such controversial tools are being more widely contemplated underscores the dilemma central banks across the world face, as the global slowdown forces them to go to extremes in shielding their economies from a strengthening currency.

The Sino-American tariff war has hurt global supply chains and manufacturing activity, slowing growth in export-reliant Asian economies and prodding some central banks to cut rates in the hope of giving exports a boost via a weaker currency.

That, in turn, has stoked fears of a cycle of competitive devaluations and prompted some policymakers to think about more radical tools.

"The RBNZ are clearly hitting things on the front foot. We are globally in a central bank easing cycle," said Stuart Ive, a Wellington-based currency and bond dealer at OM Financial.

"It's not that the RBNZ's on their own here. Everyone else is looking at exactly the same thing."

But a closer look at Europe and Japan – where negative rates are in place – shows the performance has been mixed at best.

EXCHANGE RATE PRESSURES

Until recently, adopting such unconventional policy measures had been a remote idea for most central banks in fast-growing Asia, where generally higher rates gave ample room for cuts during a downturn.

Indeed, before the Federal Reserve's shift late last year to a dovish monetary policy stance, even cutting rates too quickly was considered risky as it could trigger a massive capital outflow.

But trade tensions and volatile markets are forcing some Asian economies, particularly those reliant on trade, to look at ways to keep a spike in their currencies from hurting exports.

A negative rate policy appears a useful tool to this end, as it helps widen the interest-rate gap with the United States and so keep their currencies from appreciating against the dollar.

"I think the big way in which negative rates work is simply taking pressure off the exchange rate," said Michael Reddell, a Wellington-based economist and former senior RBNZ official.

On that measure, the policy has brought some success in Europe. Since the European Central Bank (ECB) adopted negative rates 5 years ago, the euro has lost just over a sixth of its value against the greenback.

But the Bank of Japan's (BOJ) experience paints a different picture. The yen-weakening effect of its announcement was short-lived. In just five months, the yen rose nearly 20 percent against the dollar.

The impact on growth and inflation has been even more mixed.

In the euro-zone, average corporate borrowing costs slipped to 1.6 percent in June from 2.8 percent at the time the ECB adopted negative rates in June 2014. Although economic growth initially boomed, it is now close to stagnating, having increased just 0.2 percent quarter-on-quarter in April-June. Inflation, which the ECB wants to keep below but close to 2 percent, hit a 17-month low of 1.1 percent in July, missing the target since 2013.

The benefits have also been questionable in Japan, where years of heavy money-printing had already pushed rates near zero. Bank lending rates, which were at 0.80 percent when the BOJ adopted negative rates in January 2016, stood at 0.75 percent in June.

Japan's economy grew a meager 0.4 percent quarter-on-quarter in the April-June period, slower than 0.7 percent in the first 3 months of 2016. Annual core consumer inflation stood at 0.6 percent in June, remaining distant from the BOJ's 2 percent target.

COLLATERAL DAMAGE

The biggest impediment to adopting negative rates could be the strain they inflict on financial institutions' margins.

The damage has been pronounced in Japan, where commercial banks have made little progress diversifying businesses beyond traditional lending. Intense competition in the overcrowded industry has forced many banks to lend at near-zero rates.

The BOJ warned in April that nearly 60 percent of regional banks could suffer net losses a decade from now if corporate borrowing keeps falling at the current trend.

The political backlash could also be unforgiving.

The BOJ came under criticism not just from banks but from the public, as households mistakenly thought they could be charged for their bank deposits.

Officials at the Federal Reserve have also taken a dim view of negative rates as politically unpopular and likely ineffective.

"There's no consensus among central bankers on the pros and cons of unconventional steps like negative rates. The relationship between negative rates and currency moves is also unclear," said Sayuri Shirai, a former BOJ board member who is currently professor at Japan's Keio University.

"What's clear is that the negative impact on the banking sector is huge, while the effect in boosting aggregate demand appears to be small."

source: news.abs-cbn.com

Tech leads US stocks higher; oil gains

NEW YORK -- US stocks gained ground on Monday at the onset of a heavy earnings week, while European shares inched higher as investors took heart from potential progress in US-China trade talks and increasing geopolitical tensions sent oil prices climbing.

Tech pushed Wall Street into positive territory as investors girded themselves for a week of second-quarter results from major industrial and technology companies and eyed the US Federal Reserve's expected interest rate cut at the end of the month.

The South China Morning Post reported US trade negotiators would likely visit China next week for their first face-to-face talk with Chinese officials since US President Donald Trump postponed a new round of tariffs on Chinese imports after a meeting with his Chinese counterpart in Japan on June 29.

"I don't give much credence to the (trade) news," said Stephen Massocca, Senior Vice President at Wedbush Securities in San Francisco. "The chatter will continue, but we won't see anything substantive this year."

The Dow Jones Industrial Average rose 17.7 points, or 0.07 percent, to 27,171.9, the S&P 500 gained 8.42 points, or 0.28 percent, to 2,985.03 and the Nasdaq Composite added 57.65 points, or 0.71 percent, to 8,204.14.

Growing tensions in the Middle East, coupled with worries about Britain leaving the European Union (Brexit) without a deal held world stocks flat.

"Brexit fears can be somewhat alleviated by a friendly European Central Bank, and it appears that's the way they're trending," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

The pan-European STOXX 600 index rose 0.13 percent and MSCI's gauge of stocks across the globe gained 0.05 percent.

Brent crude prices moved higher on worries that Iran's seizure of a British tanker last week could lead to supply disruptions.

US crude settled at $56.22 per barrel, up 1.06 percent, while Brent settled at $63.26, gaining 1.26 percent on the day.

The dollar and euro were little changed as traders looked to policy decisions from the US Federal Reserve and the European Central Bank regarding the pace at which they will cut interest rates, beginning with the ECB on Thursday.

"Clearly the ECB will loosen as will the Fed," added Massocca. "It's all been very well-telegraphed by the markets."

"It's positive, it's bullish, but as far as what comes out of those meetings I'm not anticipating any surprises."

The dollar index rose 0.14 percent, with the euro down 0.12 percent to $1.1207.

US Treasury yields fell and the yield curve flattened as dovish Fed bank policy supported demand for government debt.

Benchmark 10-year notes last rose 1/32 in price to yield 2.0482 percent, from 2.05 percent late on Friday.

The 30-year bond last rose 4/32 in price to yield 2.5734 percent, from 2.578 percent late on Friday.

Gold held steady, on the heels of a sharp drop in the previous session on lowered rate cut expectations, but the safe-haven metal still found support in the form of global geopolitical uncertainties.

Spot gold was up 0.08 percent at $1,425.24 an ounce.

Shipping prices rose on strong vessel demand, with the Baltic Dry Index jumping to a 5-year high.

source: news.abs-cbn.com

Collapsing bond yields push world stocks to new highs

LONDON -- Government bonds held near multi-year lows on Thursday on bets the US Federal Reserve would cut interest rates this month and that other major central banks would embrace looser monetary policy, pushing world stocks to new 18-month highs.

Germany's 10-year government bond yield, a benchmark for euro zone debt, fell to -0.4 percent and matched the European Central Bank's deposit rate for the first time -- a sign that markets are expecting rate cuts.

Other benchmark debt yields also held near record lows in the wake of their recent rally. US 10-year Treasury notes had hit their lowest since November 2016 on Wednesday, pushed down by bets that the European Central Bank's next head will maintain a dovish policy stance to buoy the euro zone economy.

"For central banks, everyone is expecting dovish moves, not only for US but also for Europe and even Japan," said Christophe Barraud, chief economist at Market Securities in Paris. "Everybody is a optimistic for quick central bank moves."

The fall in US Treasuries came after a report showed US companies added fewer jobs than expected in June, raising concerns the labor market is softening even as the current US economic expansion marked a record run last month.

With Wall Street closed for the Independence Day holiday, investors said they were now focused on Friday's US non-farm payrolls, which economists expect to have risen by 160,000 in June compared with 75,000 in May.

Separately, US President Donald Trump on Wednesday repeated his call for the United States to match what he says are efforts by China and Europe to manipulate currencies and pump money into their economies.

Government borrowing costs in the euro zone have fallen to record lows after EU leaders agreed late on Tuesday to name Christine Lagarde as the ECB's new president.

Lagarde, the current International Monetary Fund head, is widely expected to maintain the dovish stance of current ECB President Mario Draghi.

The action in bond markets buoyed stocks. MSCI's all-country world index eked out a 0.1 percent gain after hitting its highest since February last year a day earlier.

Equity markets across Europe were flat, with the Euro STOXX 600 unchanged amid thin volumes. The three major U.S. stock indexes had finished at record closing highs on Wednesday.

Italian 10-year bond yields stayed close to their lowest since late 2016 after the European Commission dropped its threat to discipline Rome over its public finances, pushing the country's main bourse to a new two-month peak.

In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2 percent.

FLAT DOLLAR, EURO

Expectations for rate cuts by the Fed saw the dollar drift away from recent highs, though currencies were by and large quiet in early European trade.

The dollar index against a basket of six major currencies was unchanged at 96.711.

The euro traded at $1.1284, a touch higher than its two-week low of $1.1268 touched on Wednesday.

FX strategists said that although the drop in US Treasury yields overnight was negative for the dollar, softness in other currencies was lending some support.

"We are seeing some euro weakness and some dollar weakness, and the two are cancelling each other out," said Thu Lan Nguyen, FX strategist at Commerzbank.

"What is happening in US and euro zone monetary policy will also determine what happens in smaller countries," she added.

In commodity markets, oil fell on data showing a smaller-than-expected decline in US crude stockpiles and worries about the global economy.

Brent crude futures, the international benchmark for oil prices, were flat at $63.84 per barrel by 1109 GMT (7:09 a.m. Friday in Manila).

source: news.abs-cbn.com

IMF's Lagarde 'honored' to be tapped to head European Central Bank

WASHINGTON -- International Monetary Fund chief Christine Lagarde on Tuesday announced she would step down "temporarily" from the global crisis lender after being nominated to lead the European Central Bank.

EU leaders announced a deal to fill the top positions in the political and economic bloc, including picking Lagarde to succeed ECB chief Mario Draghi, whose single, eight-year term ends in November.

"I am honored to have been nominated for the Presidency of the European Central Bank," Lagarde said in a statement, adding that she would "temporarily relinquish my responsibilities as Managing Director of the IMF during the nomination period."

The nomination means Lagarde will step down two years before the end of her second five-year term at the helm of the IMF, which will open a search for her replacement.

The fund's executive board met Tuesday and named American economist David Lipton, Lagarde's chief deputy, as interim leader of the institution.

"We accept Ms Lagarde's decision to relinquish her IMF responsibilities temporarily during the nomination period," the board said in a statement. 

"We have full confidence in First Deputy Managing Director David Lipton as Acting Managing Director of the IMF."

By tradition, since the institutions were created in the wake of World War II, a European has always led the IMF and an American has been at the helm of the World Bank, although emerging market nations in recent years have pressed for more representation.

When Lagarde was selected in 2011, it was the first time the fund had an open leadership search process, in which any board member or country representative could nominate a candidate. Lagarde was selected over Agustin Carstens, then the head of the Mexican central bank.

She has drawn praise for her role leading the IMF in the wake of the global financial crisis.

"She's been a tremendous ambassador for the fund, a great salesperson, a very good communicator," said Mark Sobel, a former US Treasury official and chairman of the Official Monetary and Financial Institutions Forum.

He told AFP that Lagarde has experience in monetary policy even if she has never led a central bank and, like US Federal Reserve Chairman Jerome Powell, is not an economist.

"She's been involved in all the monetary debate and it's not like they don't discuss monetary policy at the fund."

Her second term in office coincided with the rise of US President Donald Trump and a wave of confrontations among major economies over trade, which the former French finance minister described as the major threat to the world economy.

Lagarde has at the same time acknowledged the strains caused by globalization, which has disrupted industries and marginalized some workers.

source: news.abs-cbn.com

Stocks gain, dollar weakens after Fed signals possible rate cuts

NEW YORK -- A gauge of global stock markets strengthened on Wednesday, bolstered by gains on Wall Street, and benchmark US Treasury yields and the dollar dropped after the Federal Reserve signaled possible interest rate cuts over the rest of this year.

The US central bank held interest rates steady, as expected, but said it "will act as appropriate to sustain" the country's economic expansion as it approaches the 10-year mark and dropped a promise to be "patient" in adjusting rates.

The market expects the Fed could cut rates as soon as its next meeting, in July.

"I think it’s right in line with market expectations, puts a July cut in play,” said Brett Ewing, chief market strategist at First Franklin Financial Services in Tallahassee, Florida.

Nearly half of the Fed's policymakers now show a willingness to lower borrowing costs over the next six months.

Even policymakers who did not write down a forecast for a rate cut this year believe "that the case for somewhat more accommodative policy has strengthened," Fed Chairman Jerome Powell said in a news conference following the meeting.

Investors' hopes that the Fed would soon cut interest rates were fueled on Tuesday when European Central Bank President Mario Draghi hinted at economic stimulus, comments that drove up stocks and weakened yields.

"You have global central banks in a nearly orchestrated positioning, prepared to act if respective economies falter," said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey. "Clearly the market is embracing it."

MSCI's gauge of stocks across the globe gained 0.70 percent. The index rose to its highest point in six weeks.

On Wall Street, the Dow Jones Industrial Average rose 38.46 points, or 0.15 percent, to 26,504, the S&P 500 gained 8.71 points, or 0.30 percent, to 2,926.46 and the Nasdaq Composite added 33.44 points, or 0.42 percent, to 7,987.32.

The pan-European STOXX 600 index ended little changed ahead of the Fed decision.

Investors will now turn attention to U.S.-China trade relations, with a meeting between U.S. President Donald Trump and his Chinese counterpart Xi Jinping set for next week's G20 meeting in Japan.

“You have the G20 summit coming up in a week and a half, said Eric Donovan, managing director, OTC FX-interest rates at INTL FCStone in New York. "It’s kind of ridiculous to think that the Fed was going to cut today."

Benchmark 10-year U.S. notes last rose 8/32 in price to yield 2.0302 percent, from 2.058 percent late on Tuesday.

The dollar index, which measures the greenback against a basket of currencies, fell 0.41 percent, with the euro up 0.31 percent to $1.1226.

US crude settled down 0.3 percent at $53.76 a barrel, and Brent settled at $61.82 a barrel, down 0.5 percent.

source: news.abs-cbn.com

Trump trade war worsens slowdown in global economy: analysts

WASHINGTON — President Donald Trump’s trade war is chilling business investment, confidence and trade flows across the world, a development that foreign leaders and business executives say is worsening a global economic slowdown that was already underway.

Recent softening in Europe, Australia and other parts of the world coincides with Trump’s intensified trade fight with China and other partners. Economists warn that further escalation by Trump — like tariffs on more Chinese goods or levies on foreign autos — could slow global growth to a crawl.

“With these trade tensions, the global economy, in a sense, is getting close to a crossroads,” said Ayhan Kose, the director of the World Bank’s Prospects Group.

Weakness in China, driven in part by fallout from the trade war, has spread to Germany, Australia and other nations, raising supply chain costs, chilling exports and worrying political and economic leaders.

On Tuesday, Mario Draghi, the president of the European Central Bank, said the bank was prepared to inject more stimulus into the eurozone economy to combat the economic slowdown.

The effects of Trump’s trade war have been particularly hard on Germany, Europe’s largest economy, which has been bracing for a decision about whether the United States will impose tariffs on auto imports. Trade anxiety has led to a decline in business sentiment and spending: Overall German industrial production contracted sharply in April, falling 1.9 percent on the month versus the 0.5 percent analysts expected.

“The risks that have been prominent throughout the past year, in particular geopolitical factors, the rising threat of protectionism and vulnerabilities in emerging markets, have not dissipated,” Draghi said in a speech Tuesday. “The prolongation of risks has weighed on exports and in particular on manufacturing.”

Trump lashed out at Draghi by name on Twitter, accusing him of trying to weaken Europe’s currency to get a leg up in global trade by making its goods cheaper to buy overseas.

“Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA,” Trump wrote on Twitter. “They have been getting away with this for years, along with China and others.”

The president’s aggressive approach to trading partners comes as developed and developing nations are already pulling back on the rapid globalization that dominated two decades of economic policymaking. Global flows of foreign direct investment fell by 13 percent last year, to their lowest level since the financial crisis, the United Nations Conference on Trade and Development reported last week.

It was the third consecutive annual decline, which officials blamed on multinational corporations bringing cash back to the United States after Trump’s 2017 tax overhaul. Officials warned that trade tensions posed a “downward risk” for a rebound in investment growth this year.

Trump has made steady use of tariffs to punish trading partners like China, Europe, Canada and Mexico that he says have destroyed American jobs by flooding the United States with cheap products and erecting unfair economic barriers at home. The president and his top officials insist that the trade war is lifting the US economy and that any slowdown in global growth is not related to the administration’s trade policies.

Treasury Secretary Steven Mnuchin said in an interview this month that he did not “think in any way that the slowdowns you’re seeing in parts of the world are a result of trade tensions at the moment.” He noted that growth in Asia and Europe had been tapering off before trade talks between the United States and China broke down in early May.

Trump has repeatedly cited China’s slowdown as proof that his trade war is working, telling reporters last week that the United States has “picked up $14 trillion in net worth of the United States.”

“And China has gone down probably by $20 trillion,” he continued. “There’s a tremendous gap.”

But a slowdown in the world’s second-largest economy — one that’s deeply enmeshed in global trade networks — affects other economies.

“China is the biggest trading nation in the world,” said Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington. “The idea that you could slow down the global growth engine and not affect other countries is just not credible.”

Multinational companies are already shifting supply chains and delaying capital spending in response to Trump’s tariffs on Chinese goods and foreign metals.

Tom Linebarger, chairman and chief executive of diesel engine manufacturer Cummins, said last week that his company had lost business for part of its operation in China as a result of the trade war. The Indiana company is changing its sourcing practices to minimize exposure to China, and Linebarger said its costs from tariffs now exceeded the benefits from the corporate tax cuts Trump signed in 2017.

“The tariffs that are in place now, and which may be in place for some time, are a significant burden on US businesses and farms,” Linebarger said.

Data increasingly suggest trade tensions are weighing on economic confidence, globally and in the United States.

A Federal Reserve Bank of New York manufacturing survey registered its worst drop ever on Monday, which many economists blamed on Trump’s threats this month to impose tariffs on Mexican imports as punishment for failing to curb unauthorized immigration. While those tariffs were averted, the chance that Trump could make a similar move against another trading partner has caught the attention of global companies and foreign leaders.

The trade war is having “a much bigger impact” on business hiring and investment in the United States than most analysts think, Deutsche Bank wrote in a research note on Monday. Several measures of policy uncertainty, compiled by economists Scott R. Baker of Northwestern University, Nicholas Bloom of Stanford University and Steven J. Davis of the University of Chicago, have spiked with the increased tensions.

On Tuesday, Trump said on Twitter that he had spoken by phone to President Xi Jinping of China and that the two leaders would have an “extended” meeting next week at the Group of 20 summit in Japan. Those comments could help calm global trade fears, which had risen after the United States accused China of breaking a trade deal last month and Trump raised tariffs on $200 billion worth of Chinese goods as punishment.

But no agreement is guaranteed, and Trump has threatened to impose tariffs on an additional $300 billion of Chinese goods if Xi does not agree to the original deal. The president has already placed import taxes on $250 billion worth of products from China and has hit trading partners with steel and aluminum tariffs and threatened tariffs on foreign autos from Europe and Japan.

The World Bank cut its forecast for global growth by 0.3 percentage points for this year in response to unexpected weakness in trade and manufacturing across advanced and developing economies. Global trade growth has slowed to its lowest rate since the 2008 financial crisis as exports from Europe and Japan have plummeted, particularly to China.

The bank noted that heightened policy uncertainty, including trade tensions, had been accompanied by slowing global investment and weakening confidence. It warned in a report this month that risks to its outlook were “firmly on the downside, in part reflecting the possibility of destabilizing policy developments, including a further escalation of trade tensions between major economies.”

International Monetary Fund economists estimate that if Trump follows through on his threat to broaden the Chinese trade spat, tariffs added this year alone will subtract 0.3 percent off global gross domestic product in 2020, with an additional 0.2 percent drag coming from tariffs the administration put in place last year.

Manufacturing, which is especially vulnerable to trade, is slowing across advanced economies even as service industries hold up. Factory gauges have dipped lower across Europe and are wavering in Japan. In the United States, the Institute for Supply Management’s factory index dropped to its lowest reading of Trump’s presidency in May.

Trade policies aren’t the only culprit behind slowing production. A continuing, structural slowdown in Chinese growth and tensions from Britain’s attempted exit from the European Union are among other factors.

China posted its weakest economic growth in 28 years in 2018, a pullback analysts blame partly on structural reforms and long-running trends and partly on the trade spat. Analysts at Moody’s Investors Service expect a further slowdown in 2019, to 6.2 percent from 6.6 percent, amid continued trade uncertainty.

Europe, where the IMF estimates 70 percent of exports are links in global supply chains, is particularly sensitive to trade disputes. And Germany highlights how the trade war between the United States and China can spill over.

The nation’s car industry is the backbone of its economy and is dependent on China for growth. As trade tensions exacerbate China’s economic weakening, manufacturers in Germany pay the price.

Volkswagen, the world’s largest carmaker, said last week that sales in China fell 7 percent from January through May, to about 1.2 million vehicles. Largely because of China, Volkswagen’s global sales fell 5 percent during the same period.

“We are experiencing the biggest decline in the world auto market in 20 years,” Ferdinand Dudenhöffer, a professor at the University of Duisburg-Essen, said in a report. If Trump follows through on threats to impose further tariffs on China, Dudenhöffer said, “there is danger of a global auto crisis.”

Germany’s central bank has slashed its forecast for growth this year to 0.6 percent from 1.6 percent. That bleak change was “mainly due to the downturn in industry, where lackluster export growth is taking a toll.”

“The fear factor, the uncertainty, is denting willingness to spend, willingness to invest,’’ said Carsten Brzeski, chief economist for Germany and Austria at ING in Frankfurt. “It’s therefore undermining growth in the eurozone.”

And in Australia, where an almost 28-year-old expansion is looking less secure and the central bank recently cut rates for the first time since 2016, economic officials are watching trade wars warily. The governor of the Reserve Bank of Australia, Philip Lowe, called international trade disputes “the main downside risk” in a recent news conference.

If coming trade negotiations don’t end in a resolution, the United States and its companies could also pay a price, leaders of the Business Roundtable, a corporate lobbying group in Washington, warned last week.

“The biggest self-inflicted risk to growth today would be trade going south,” said Jamie Dimon, chief executive at JPMorgan Chase.


2019 New York Times News Service

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World stocks slide before corporate results, dollar gains

NEW YORK -- A gauge of global equity markets slid on Thursday as investors waited for first-quarter earnings reports, while Treasury yields rose after strong US data and a six-month extension of a deadline for Britain to leave the European Union.

The dollar index rose as worries about the world's largest economy eased after US data showed March producer prices increased by the most in five months and weekly jobless claims fell to the lowest since 1969.

The data followed a decision by EU leaders to push the Brexit deadline to Oct. 31 so that Britain would not crash out of the bloc on Friday without a treaty - though it offered scant clarity on when, how or if departure will happen.

Regional and country indexes in Europe rose but Wall Street retreated as investors awaited the first-quarter US earnings season, which starts in earnest on Friday. Profit estimates have dropped steadily in the last six months, with earnings by S&P 500 companies expected to fall 2.5 percent and mark the first year-on-year decline since 2016, according to Refinitiv data.

"The big elephant out there is earnings. Street estimates are for a year-over-year decline despite higher revenue and that's driven by a handful of large companies that are heavily weighted, so it could be a bit deceiving," said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

"Often the market will just wait it out when we start to get close to earnings."

MSCI's gauge of stock market performance in 47 countries shed 0.17 percent, while the pan-European STOXX 600 index closed up 0.11 percent. France's CAC 040, Germany's DAX and Italy's MIB all rose.

European airline stocks rose, with the travel and leisure index rising 1.3 percent, after the Brexit extension. Irish stocks, which are especially sensitive to a potential hard Brexit, tacked on 0.6 percent.

Trading volume on Wall Street was the lowest so far in 2019.

The Dow Jones Industrial Average fell 14.11 points, or 0.05 percent, to 26,143.05. The S&P 500 gained 0.11 point to 2,888.32 and the Nasdaq Composite dropped 16.89 points, or 0.21 percent, to 7,947.36.

STERLING SLIPS

In currency trading, the dollar index rose 0.23 percent, with the euro down 0.14 percent to $1.1257.

The Japanese yen weakened 0.57 percent versus the greenback at 111.66 per dollar. Sterling fell 0.25 percent to $1.3056, suggesting fears remain about Brexit.

Germany's 10-year bond yield edged up after the Brexit announcement, while a signal from the European Central Bank that it will fight low economic growth and inflation boosted peripheral debt.

Germany's 10-year bond yield was up 0.02 percentage point at negative 0.01 percent.

US Treasury benchmark 10-year notes last fell 6/32 in price to yield 2.5006 percent.

Oil prices fell more than 1 percent after sources said the Organization of the Petroleum Exporting Countries may raise output from July if Venezuelan and Iranian supplies fall further and prices keep rallying.

US crude fell $1.03 to settle at $63.58 per barrel. Brent settled down 90 cents at $70.83.

Gold prices fell more than 1 percent, slipping below the key $1,300 level, as robust economic data from the United States boosted the dollar, taking the sheen off the safe-haven metal.

US gold futures settled 1.6 percent lower at $1,293.3 an ounce. 

source: news.abs-cbn.com

World stocks, euro inch higher on ECB stance

NEW YORK -- The euro rose and world stock markets edged higher on Wednesday following tame US inflation data and as the European Central Bank left its ultra-easy policy stance unchanged but warned that economic risks remained to the downside.

ECB President Mario Draghi confirmed policymakers were considering whether measures are needed to mitigate the impact on European banks of the central bank's negative deposit rates.

European bank stocks declined and the yield on Germany's benchmark 10-year bond fell to a one-week low of negative 0.039 percent, about 0.05 percentage point from 2-1/2 year lows they hit last month.

Major European stock indexes rose, though sentiment was capped by US threats earlier this week to slap tariffs on goods from the European Union.

Separately, data showed US consumer prices increased by the most in 14 months in March but underlying inflation remained benign against a backdrop of slowing global economic growth.

Minutes from a March 19-20 meeting of Federal Reserve policymakers show they saw the US economy weathering a global slowdown without a recession in the new few years.

Policymakers debated how to manage the Fed's massive holding of bonds and agreed to be patient about any changes to its interest rate policy.

MSCI's all-country equity index gained 0.26 percent, while the pan-regional FTSEurofirst 300 index of leading shares closed up 0.17 percent.

Reckitt Benckiser Group Plc shares fell 6.5 percent to weigh on Britain's blue chip FTSE 100 index after the US Justice Department accused Indivior Plc, a former RB unit, of illegally boosting prescriptions for its blockbuster opioid addiction treatment. Indivior shares tumbled 71.6 percent.

On Wall Street, the Dow Jones Industrial Average rose 6.58 points, or 0.03 percent, to 26,157.16. The S&P 500 gained 10.01 points, or 0.35 percent, to 2,888.21 and the Nasdaq Composite added 54.97 points, or 0.69 percent, to 7,964.24.

Industrial stocks closed down a bare 0.01 percent, after shares pared losses following the Fed minutes, as Boeing Co shares continued to weigh. The company on Tuesday reported zero new orders for its 737 MAX jet following a worldwide grounding of the aircraft in March.

Boeing's shares fell 1.1 percent but the Dow Industrials also pared losses to close slightly higher.

US Treasury yields slipped, weighed down by the tepid US inflation data for March, which reinforced expectations that the Fed would hold rates steady or possibly cut them by the end of the year.

"There is a persistent trend of inflation underperformance that may soon become problematic for the Fed," said Ian Lyngen, head of US rates strategy at BMO Capital Markets in New York.

The benchmark 10-year U.S. Treasury note rose 8/32 in price to push its yield lower to 2.4702 percent.

The euro recouped earlier losses.

The dollar index fell 0.07 percent, with the euro up 0.09 percent to $1.1271. The Japanese yen strengthened 0.13 percent versus the greenback at 111.01 per dollar.

Oil prices rallied more than 1 percent after U.S. data showing a deep drawdown in gasoline stocks overshadowed crude inventories rising to 17-month highs, and as sanctions and blackouts in Venezuela helped tighten global supplies.

International benchmark Brent futures settled up $1.12 to $71.73 a barrel. U.S. West Texas Intermediate (WTI) crude oil futures climbed 63 cents to settle at $64.61 a barrel.

Gold rose on Wednesday, lifted to its highest in almost two weeks as investors fretted about the global economy and trade tensions.

US gold futures settled 0.4 percent higher at $1,313.90 an ounce.

source: news.abs-cbn.com