LONDON — European stocks, bonds and the dollar traded more calmly on Monday after last week’s turbulence, though a 3 percent dive in Japan’s main share index kept investors on edge.
Holidays in the United States and Britain kept European equity and bond markets quieter than usual, but with last week’s declines tempting buyers, the Euro Stoxx 50 rose 1.1 percent, and Italian and Spanish bonds managed their first gains in three sessions.
The dollar was also steadier, though it slid back to 101 against the yen as the latest lurch in Japanese equities encouraged investors who have been unwinding their dollar hedges on share portfolios and heading for bonds.
The 3.2 percent drop on Tokyo’s Nikkei 225 index brought its losses since Wednesday to nearly 10 percent, though the index is still up 36 percent this year.
Last week’s shakeout of equity, bond and currency markets was set off by concerns that the Federal Reserve could wind down its monetary support sooner than had been expected. In addition, there was weak Chinese data, and doubts over how low Japan would allow the yen to go.
But despite the wobble, analysts largely foresee a period of moderation in risk assets, rather than a big correction.
Dan Morris, a global strategist at J.P. Morgan Asset Management, said that a pullback by the Fed would be turbulent, but added, “With fundamental drivers for equities still supportive, investors should tighten their seat belts instead of reaching for the parachute.”
Whereas the Fed appears to be weighing an exit from its crisis measures, the European Central Bank may still have some scope to counter a long-running euro zone recession caused largely by efforts to contain the bloc’s sovereign debt crisis.
On Wednesday, the European Commission will release its review of countries’ debt-cutting policies, which will confirm that France, Spain, Slovenia and others may be given more time to trim their budget deficits. The Organization for Economic Cooperation and Development will publish a review of major economies on the same day.
Three Italian government bond auctions this week will also test demand after the talk of Fed stimulus withdrawal.
Italian and Spanish bonds were caught in the sell-off in risk assets last week, but yields on both have eased back as focus turns to the European Central Bank’s next step.
Jörg Asmussen, who sits on the central bank’s executive board, said that the bank would remain accommodative “as long as needed,” although he sounded cautious about charging banks to put money on deposit at the central bank, something that could help hold down borrowing costs.
“One should be very cautious regarding the discussion if the E.C.B. could introduce negative deposit rates,” Mr. Asmussen said in a speech in Berlin. “This can have advantages, but it can also have disadvantages.”
The mood was again tentative in the commodities markets. Brent crude slipped to $102.62 a barrel, extending last week’s 2 percent drop, as the patchy economic outlook in a well-supplied market pressured prices.
Anxiety in the broader market also helped gold, considered a safe-haven investment, firm up at $1,394.39 an ounce as it built on last week’s best run in a month. Copper, a metal more attuned to growth, fell 0.2 percent.
After disappointing data from China last week dimmed the outlook for global oil demand, the oil producer cartel OPEC was expected to keep policy unchanged at a meeting on Friday.
The shale revolution in the United States, still the biggest oil consumer, may even bring an end to the relentless rise in fuel prices seen over the past decade.
“OPEC is in a hard situation,” said Chakib Khelil, who was Algeria’s oil minister from 1999 to 2010. “The demand for OPEC oil is going down, while increasing demand is being met by others.”
Article source: http://www.nytimes.com/2013/05/28/business/daily-stock-market-activity.html?partner=rss&emc=rss
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