LONDON, Aug 11 — World stocks were flat today with Wall Street looking at a soft opening and Europe sliding in typically thin August trade. Japan’s Nikkei earlier hit a 10-month closing high despite disappointing Chinese data that drove up the yen.
The dollar was lower across the board, a break from recent trends in which it has risen on bearish economic news.
China’s industrial output grew at the fastest rate in nine months in July but fell short of expectations, disappointing some in the market.
One result was that currency dealers unwound some trades that had favoured high-yielding currencies such as the Australian and New Zealand dollars.
This lifted the yen across the board, but failed to dent sentiment on Japan’s bourse. The Nikkei rose 0.6 per cent or 61.20 points to 10,585.46, its highest finish since October 3.
The generally upbeat equities mood carried over into Europe at first, but later dissipated. The pan-European FTSEurofirst 300 index of top shares was down 0.2 per cent.
Trading was generally muted because of the northern hemisphere’s summer lull.
“The market is keeping a low profile at the moment,” said Postbank equity strategist Heinz-Gerd Sonnenschein.
The MSCI-all-country world index, the global benchmark for many investors, was flat. It has gained nearly 19 per cent this year and is up around 58 per cent since hitting a low in March. This has investors divided about whether a bull market is in the making or whether bourses are heading for a fall.
“We do have concerns about the sustainability of the rally, but we would also point out that valuation measures remain attractive and that there is still a large amount of cash on the sidelines waiting to be invested,” Bob Doll, global chief investment officer for equities at BlackRock, said in a note.
“As a result, we believe the current cyclical bull market remains intact.”
DOLLAR DOWN
The dollar was down around 0.3 per cent against a basket of major currencies primarily as a result of the euro gaining 0.3 per cent to US$1.4183 and the yen rising nearly two thirds of a per cent to ¥96.36.
Currency traders are also looking ahead of the end of the Federal Reserve’s two-day policy meeting tomorrow.
After better than expected US jobs data last week and a sharp rise in the dollar, the market has been trying to ascertain whether the rising risk appetite-falling dollar dynamic which has held for much of this year has started to crumble.
The market has even begun to price in tightening by the Federal Reserve early in 2010.
“Whether a paradigm shift is taking place with regards to a loosening in correlation between risk aversion and the US dollar is still too early to call,” said Jonathan Cavenagh, a currency strategist at Westpac, Sydney.
Euro zone government bond yields were mixed. The two-year Schatz yield was at 1.504 per cent and the 10-year at 3.487 per cent. – Reuters
Show/Hide comments
Show/Hide comment form
