Global stocks came off record highs and the euro fell back towards seven-week lows yesterday as minutes from the European Central Bank’s last meeting showed policy-makers had widespread concerns about the single currency’s rapid rise.
The ECB’s plans to map an exit from an era of ultra-easy monetary conditions could be complicated by the euro’s strength, while uncertainty over who will succeed Janet Yellen at the helm of the US Federal Reserve is also keeping investors occupied.
Monetary policy stole focus from political tensions in Spain, where one of its richest regions Catalonia is set to declare independence on Monday.
Spanish bonds recovered ground after firm demand at a debt sale, while its stock market was bolstered by a recovery in Catalan bank shares.
Euro zone stocks more broadly steadied from a wobble on Wednesday, but with public holidays across Asia and some key data due from the world’s largest economy the United States coming up later this week, an index of global stocks edged down.
Wall Street was set to open a touch higher, however, eyeing another record high.
A Reuters poll showed global stocks will rise even more over the coming year as optimism about the global economy grows, but a slim majority of equity strategists polled by Reuters also said the current eight-year bull run will end in 2018.
The euro hit a day’s low of $1.737 after the release of the ECB minutes from its September meeting, down 0.2 per cent against the dollar and heading back towards a seven-week low of $1.169 hit earlier this week.
This will be uncomfortable for the many investors who have staked vast sums on its rise.
The amount of cash hedge funds are staking on a rising euro is the biggest in more than five years, the latest positioning data from the Commodity Futures Trading Commission showed.
There were some eye-catching moves elsewhere in currency markets as economic and political concerns at one stage knocked half a percent off the Australian dollar, the South African rand and the British pound.
The dollar was up 0.2 per cent against a basket of major currencies yesterday, having slipped a bit on Wednesday after a survey showed hiring slowed to an 11-month low of 135,000, partly to disruptions from hurricanes, although this was better than economists’ median forecast.
US 10-year bond yields were a tad lower at 2.32 per cent, holding below multi-month peaks hit earlier this week.
Oil prices steadied yesterday on expectations that Saudi Arabia and Russia would extend production cuts, although record US exports and the return of supply from a Libyan oilfield dragged on the market.
Brent crude was up 35 cents at $56.15 a barrel and US light crude up 10 cents at $50.08.