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Yen buoyed by data, oil weighs on stocks
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Yen buoyed by data, oil weighs on stocks
European stocks fell on yesterday as oil crawled back above $68 a barrel, while the Japanese yen extended gains against the dollar on economic optimism ahead of a Bank of Japan policy meeting later this week.
Bond markets extended losses as investors continued to book profits on Friday?s rally, sparked by soft U.S. housing data.
European shares slipped from near four-month highs, pulled lower by technology and retail stocks, but analysts said equity losses should be short-lived given that crude was still hovering at its lowest in over three months.
Dealers started unwinding extreme short yen positions after data showing a rise in Japanese capital spending on Monday rekindled speculation that the central bank there might raise rates this year despite a run of soft economic data last month.
The Bank of Japan (BOJ) decides on interest rates this Friday and its post-decision conference will be closely watched.
The BOJ raised key rates to 0.25 percent for the first time in six years in July, but since then it has stressed that future increases will come only gradually.
This comes at a time when soft U.S. data especially in the housing sector has reinforced expectations that the Fed will refrain from hiking rates for now.
The dollar traded down a quarter percent on the day against the yen at 115.88 yen.
With speculation rife that the Fed will remain on hold in the near future, a report by the Organisation for Economic Cooperation and Development saying the Fed may need to raise interest rates weighed on bonds.
Euro zone government bonds had already weakened in early trade, as investors cashed in on Friday?s rally and awaited the return of U.S. players after a public holiday on Monday.
Euro zone services growth slowed more than expected in August to its weakest pace since January but price rises persisted.
The European Central Bank is widely expected to raise rates twice more in coming months to reach 3.5 percent by year-end, according to Reuters polls.
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