The euro rebounded from a 13-month low yesterday after a report suggested the European Central Bank might not introduce more stimulus next week while major US stock indexes were little changed, with the S&P 500 hovering just above the 2,000 milestone.
Reuters yesterday cited ECB sources who said the bank is unlikely to embark on new policy measures at its meeting next week unless August inflation figures due today signal the 18-nation block is moving closer toward deflation.
Traders said the report cooled earlier expectations of ECB action at its September 4 meeting after ECB president Mario Draghi’s call for more policy action last week.
Bets that the ECB is on the brink of introducing a bond purchase programme to inject more stimulus into the eurozone economy had earlier driven the euro to its weakest level against the dollar in 13 months.
The speculation also drove the region’s government bond yields to record lows and spurred a rise in European share prices for a third day.
Among key commodities, Brent crude oil rose on reduced supply from a large oil field in the North Sea due to extra maintenance.
Gold climbed as the dollar retreated against a basket of major currencies. Investors were wary about piling into equities and other risky assets after Ukraine accused Russian forces of a fresh military incursion across its border.
“Global sovereign bonds and global equities are continuing to rally together, which is clearly unsustainable in the short term,” said Michael Woolfolk, global markets strategist at BNY Mellon in New York.
In midday trading, the Dow Jones industrial average was up 8.4 points, or 0.05 per cent, at 17,115.1, the S&P 500 was flat at 2,000.07, and the Nasdaq Composite was 0.33 points, or 0.01 per cent, lower at 4,570.30.
The pan-European FTSEurofirst 300 index provisionally closed up 0.1 per cent at 1,378.24 points.
Tokyo’s Nikkei ended up 0.1 per cent at 15,534.82. The MSCI world equity index, which tracks shares in 45 nations, rose 0.41 point, or 0.09 per cent, to 432.05.
Prior to the Reuters report that suggested the ECB might not act next week, speculation of imminent ECB easing had intensified on comments from Italy’s economy minister, Pier Carlo Padoan, who said Italy must lower its growth forecast for this year, and on data showing a fall in German consumer sentiment for the first time since early last year.
The yield on the benchmark German Bund was last at 0.913 percent after earlier hitting a record low of 0.896 per cent.
Yields fell across the eurozone but were off earlier lows.
The euro broke to an 13-month low of $1.3151 in Asian trade yesterday before hitting a session high at $1.320, up about 0.3 per cent on the day.
The rebound in the euro weighed on the dollar index, which was down 0.23 per cent at 82.46.
As the greenback softened against major currencies, gold clung to a 0.1 per cent gain at $1,281.56 an ounce.