Global stock index on Tuesday, December 12, retreated from its three-day rally. The MSCI index of world equities, MIWD00000PUS, which tracks stocks across 47 countries, was flat after posting three straight days of gains. Wall Street futures indicated a positive open. ESc1
The jump in oil helped boost energy-heavy European stock indices, with the pan-European STOXX index rising 0.3 percent by afternoon in London. Europe’s oil and gas sector index hit its highest in a month. .SXEP
Earlier in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS drifted off 0.3 percent, having bounced 2 percent in the past three sessions, with markets consolidating in the hope an upswing in global growth could outlast a likely hike in U.S. interest rates this week.
Commodity-linked currencies also got a boost from the pick up in oil prices. The Australian dollar and the New Zealand dollar were both over half a percent higher while the Norwegian crown rose 0.6 percent.
Investors continued their policy vigil with the U.S. Federal Reserve set to end its two-day meeting on Wednesday, while the European Central Bank and the Bank of England will meet for the last time in 2017 on Thursday.
JPMorgan economist David Hensley suspects the Fed will revise up its growth forecast while trimming the outlook for the unemployment rate, potentially adding upside risk to the “dot plot” forecasts on interest rates.
“The dot plot previously called for three hikes in 2018; it is a close call whether this moves to four hikes,” he warned, a shift that would likely boost the dollar but could bludgeon bonds.
“For its part, the European Central Bank (ECB)is likely to emphasize its low-for-long stance and continue to distance itself from the Fed,” he added. “The staff is likely to revise up its 2018 growth forecast, while we think the core inflation forecast will reveal an even slower recovery than before.”
The divergence in Fed and ECB policy was supposed to be bullish for the dollar, given it had widened the premium offered by U.S. two-year yields US2YT=RR over German yields DE2YT=RR to 256 basis points from 188 basis points this time last year.
The last time the spread was that plump was in 1999.
Yet the euro is currently up 12 percent on the dollar this year, while the dollar is down 8 percent on a basket of currencies .DXY – an indication interest rate differentials aren’t everything in forex.
The dollar was idling at 113.50 yen JPY=, just off a one-month top of 113.69, while the index that measures it against a basket of peers was down 0.1 percent. .DXY
There was a little more action in bitcoin, which was last up over half a percent on the day at $16,633 on the Bitstamp exchange BTC=BTSP. The cryptocurrency’s newly launched 1-month futures contract <0#XBT:> fell 4 percent to stand at $17,830 on its second day of trading.
Gold remained out of favour at $1,242.51 an ounce XAU= having suffered its biggest weekly drop since May last week, Reuters reports.
