World Markets Flat, Dollar Slides Awaiting Fed Move
World stock markets were steady Thursday ahead of European interest rate decisions and the start of the U.S. corporate earnings reporting season, while the dollar slid further against other currencies.
The euro edged up towards $1.40 for the first time since early February while the dollar dropped below the level that forced the Bank of Japan to intervene in the markets to stem the export-sapping appreciation of the yen
In Europe, the FTSE 100 index of leading British shares was up 5.43 points, or 0.1 percent, at 5,686.82 while Germany’s DAX rose 10.37 points, or 0.2 percent, at 6,281.10. The CAC-40 in France was 8.19 points, or 0.2 percent, higher at 3,773.10.
A similarly lackluster performance was expected when Wall Street opens later, with Dow futures 11 points higher at 10,917 and the broader Standard & Poor’s 500 futures around a point higher at 1,157.
Stocks have been buoyed since Tuesday’s decision by the Bank of Japan to cut its interest rate to near zero percent and its announcement it is preparing a 5 trillion yen ($60 billion) fund to buy government bonds and other assets to prop up the faltering Japanese economy.
Investors have concluded that the Federal Reserve will itself resume asset purchases of some form or other in the next few weeks — the most likely date is thought to be Nov. 3 at the conclusion of its next rate-setting meeting.
Much could well hinge on Friday’s U.S. nonfarm payrolls data, which often set the market tone for a week or two after their release. Most economists think the figures won’t be good enough to stop the Fed from announcing fresh stimulus measures.
The prospect of more dollars in the system have underpinned stocks around the world, but have weighed hard on the U.S. currency itself. By early afternoon London time, the euro was 0.3 percent higher at $1.3975, just shy of its earlier eight-month high of $1.3994.
All eyes will be on what, if anything, the European Central Bank’s President Jean-Claude Trichet says about the euro’s return to favor when he holds his monthly press conference following the bank’s expected decision to keep the key interest rate unchanged at 1 percent. The Bank of England kept its interest rate unchanged at the record low of 0.5 percent, as expected.
Although he typically refrains from commenting on the value of the euro, Trichet is expected to address the issue of the currency’s rise and its impact on the debt problems and austerity measures facing many eurozone countries, notably Ireland and Greece.
“Any comments on the strength of the euro will be scrutinized,” said Mitul Kotecha, head of global foreign exchange strategy at Credit Agricole.
Meanwhile, the dollar was down 0.7 percent at 82.35 yen, just above its earlier 15-year low of 82.25 yen.
The markets are on the lookout for another intervention by the Bank of Japan now that the dollar has fallen below the 82.87 yen level it intervened last month.
Even though, the rate is below the intervention rate, analysts still think that the Japanese authorities can claim a level of success from its earlier action but will need to enter the markets once again to prevent a drop below 80 yen.
“If it were not for the threat of intervention from the Japanese authorities, it is likely that the dollar would be trading closer to its record low at 79.75 yen,” said Lee Hardman, currency economist at the Bank of Tokyo-Mitsubishi UFJ.
“To maintain the credible threat of intervention in the market they will soon have to intervene again as the previous pre-intervention low has now been taken out,” he added.
Besides economic indicators and central bank decisions, the quarterly earnings reporting season begins Thursday — aluminum company Alcoa Inc. is the first major company to report
“Alcoa’s results will be particularly important as they will set the agenda for third quarter earnings,” said David Buik, markets analyst at BGC Partners.
Trading had been fairly subdued in Asia earlier, with South Korea’s Kospi closing down 0.2 percent to 1,900.85 while Japan’s Nikkei 225 stock averaged dropped 0.1 percent, to 9,684.81. Hong Kong’s Hang Seng index ended flat at 22,884.32.
Benchmark oil for November delivery was up 43 cents at $83.66 a barrel in electronic trading on the New York Mercantile Exchange.
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Associated Press Writer Pamela Sampson in Bangkok contributed to this report.
PAN PYLAS, AP Business Writer LONDON