LONDON (Reuters) – World shares and the dollar slipped on Tuesday as oil prices climbed amid doubts over the real impact of the Iran nuclear deal and renewed political tensions in the East China Sea.
Wall Street was expected to see a steady start when trading resumes having hit its latest in a string of record highs on Monday after some disappointing data bolstered expectations the Federal Reserve will hold off scaling back its stimulus.
Fresh insight into the U.S. economy’s strength will come with the release of November consumer confidence data at 1500 GMT and 1400 GMT September CaseShiller read on home prices. Both are expected to see a small pick-up. .N
After some mixed performances in Asia, the pan-European FTSEurofirst 300 .FTEU3 share index struggled through the morning and was down 0.3 percent ahead of the U.S. restart as the approaching month-end added to a general mood of caution.
“I think the U.S. consumer confidence reading is the important number later,” said Rabobank economist and strategist Elwin de Groot.
“Because it is coming out of the U.S. shutdown, if it’s higher I think it will be seen positively by the market. It could be good for risk assets although Treasuries might not do so well,” he added.
With the Thanksgiving holiday in the U.S. on Thursday approaching fast it had been a day where investor appetite for fresh bold moves had been lacking.
Having already reversed Monday’s $3 drop, Brent oil was holding above $111 a barrel as New York started with investors continuing to question how quickly Iranian oil could come back on stream following its deal with world powers.
“The interim six-month ‘freeze’ agreement on Iran’s nuclear program should not have any impact on oil prices, aside from short-term sentiment, because core sanctions on oil and banking have not been touched,” Societe Generale said in a note.
“If and when (a comprehensive agreement) happens, it could take Iran three to nine months to recover the 1 million barrels per day in production lost since 2011.”
INFLAMMATORY REMARKS
An escalation of political tensions in parts of Asia were also in focus and helped keep gold near a one-week high though a softer dollar left it vulnerable.
The White House has called China’s demands that airlines inform Beijing when flying over disputed islands in the East China Sea, “unnecessarily inflammatory.
Thailand was also in the spotlight as anti-government protesters stepped up their bid to oust Prime Minister Yingluck Shinawatra, while talk that the central bank had intervened in the currency market saw the baht bounce from an 11-week low.
The China tensions kept the dollar .DXY under pressure after disappointing housing data had put it –and U.S. government bond yields– on the back foot on Monday.
The dollar index .DXY which measures the greenback against six major currencies, was down a steady 0.2 percent at 80.744 as it stayed away from last week’s high of 81.29.
At the other end of the seesaw, the euro climbed 0.3 percent to as high as $1.3552, while the yen rebounded to 101.40 to the dollar.
“The dollar’s own issues about whether Fed tapering will take place or not make the euro the next best alternative,” said Daragh Maher, currency strategist, at HSBC. “But the euro is looking rather toppish here.”
DOLLAR BULLS
The weaker-than-expected housing data had bolstered the view the Federal Reserve will wait a while longer before attempting to scale back its huge stimulus program that has long been fuelling the rally in global stocks.
It had squeezed down the yields on U.S. Treasuries overnight, and euro zone government bonds followed suit as investors kept a close eye on the ECB for any signs it is contemplating more easing.
Currency traders were largely circumspect about the yen’s bounce. The dollar had risen almost 2 percent against the Japanese unit in the last three sessions and it was expected to stay under pressure after some at the Bank of Japan’s latest meeting expressed lingering concerns about growth and inflation.
Tokyo’s Nikkei benchmark .N225, as usual, had felt the negative effects of the stronger yen as it shed 100 points though it remained well within reach of a 5-1/2 year peak reached in May. .T
“We remain bullish on the dollar heading into 2014 but remain tactically cautious on establishing longs, with a number of U.S. dollar pairs already trading at the high end of their ranges and data unlikely to be consistent enough to support expectations for an early Fed tapering,” analysts at BNP Paribas wrote in a note.
(Reporting by Marc Jones- Editing by Hugh Lawson)
0 comments
Share
