Taylor Scott International News
http://www.ft.com/cms/s/0/78a30882-15dc-11e3-b519-00144feabdc0.html#ixzz2e0jj0PQn By Jamie Chisholm Thursday 10:35 BST. Optimism on the global economy is helping nudge many growth-focused assets higher, but the bullishness is contained by worrying over the potential geopolitical fallout of the Syria crisis and some monetary policy uncertainty. Stronger European financials but weaker energy stocks leaves the Stoxx 600 index barely changed after the FTSE Asia-Pacific index rose 0.2 per cent. US index futures point to the S&P 500 on Wall Street opening flat at 1,653. The dollar index is up 0.1 per cent to flirt with one-month highs, while gold is up $1 to $1,392 an ounce. Underpinning investor sentiment is a recent rash of fairly upbeat economic data. Well-received manufacturing and service sector surveys from China and Europe this week have joined with better US figures – such as buoyant car sales in August – to raise hopes of a broadening global recovery. That has lifted industrial commodities of late, and many are mildly firmer again on Thursday, with copper up 0.3 per cent to $3.25 a pound and Brent crude adding 48 cents to $115.39 a barrel. However, oil is also getting support from wariness about the chances of supply disruption should the US attack Syria. The potential for broader political fallout following any such action will be in focus as the G20 meets in Russia, which supports the Damascus government; and fretting over this issue is likely to be suppressing the broader market’s confident tone. China’s vice finance minister has warned that a military strike on Syria would hurt the global economy, and Turkey’s lira, which has been buffeted of late by Syria-linked and emerging market tensions, is 1.3 per cent weaker to trade at a record low of TL2.075 per dollar. Also causing some reticence is possible monetary policy “headline risk”. The session sees strategy announcements from the central banks of Japan, Sweden, the UK and the eurozone – a lot for traders to absorb. Labour market data from the US – in the form of the weekly initial unemployment claims and the ADP private sector jobs survey – will set the scene for Friday’s non-farm payrolls numbers, a report considered crucial in formulating the Federal Reserve’s decision on when to start reducing its bond buying programme. “We expect this Friday’s employment report to seal the deal on a September tapering announcement,” said analysts at Société Générale. US implied borrowing costs are consequently moving up, pulling other highly-rated sovereigns along in their wake. The 10-year Treasury yield is up 4 basis points to 2.93 per cent, flirting with two-year highs, while equivalent duration Bunds are advancing 6bp to show 2.0 per cent for the first time since March 2012. Japanese benchmark bonds are up 1bp at 0.79 per cent after the Bank of Japan concluded its two-day meeting, leaving rates and its asset purchase programme unchanged. In an upbeat statement, the BoJ lifted its assessment of Japan’s economy, which it said appeared to be “recovering moderately”. The yen briefly moved above Y100 versus the dollar, but is now changing hands at Y99.85, just 10 pips weaker on the day. After gaining 5 per cent so far this week, the Nikkei 225 has similarly decided to take time for consolidation, closing up just 0.1 per cent. In Hong Kong, the Hang Seng index was up 1.2 per cent, but on the mainland the Shanghai Composite was down 0.2 per cent, highlighting a mixed session for the region. Australia’s S&P/ASX 200 index lost 0.4 per cent after figures showing a greater than expected trade deficit for July. On the back of below-forecast mineral exports, the deficit reached A$765m after a modest surplus of A$243m in June. “There is nothing here to challenge the growing view that mining investment has already peaked, with little signs of a pick-up in other sectors so far,” said economists with TD Securities. Australia holds its federal election on Saturday, where the opposition Liberal Party candidate is expected to win. The Aussie dollar is seeing some profit taking after bouncing 3 per cent in the past three sessions on reduced expectations for easier monetary policy following stronger than forecast second-quarter GDP data. The Aussie is weaker by 33 pips to US$0.9133. The Indian rupee is moving further away from record lows as the market perceives greater credibility in the Reserve Bank of India’s new chief. Confidence in Raghuram Rajan’s measures to support the currency sees the dollar fall 1.4 per cent to Rs66.14, nudges bond yields lower and has helped boost the Sensex equity gauge by 2.3 per cent. Additional reporting by Sarah Mishkin in Hong Kong Taylor Scott International
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