Europe
A smaller than expected monthly rise in German consumer prices sent the euro lower on Wednesday and helped European stocks edge higher before the release of US central bank meeting minutes released after the close.
Gains were capped as markets awaited any decision by the European Central Bank over its policy towards its ELA program for Greece. There is a chance the ECB could increase collateral requirements for the emergency loans issued to the Bank of Greece, making it harder still for the country to fund itself.
One of the biggest reasons that Greece’s Eurozone creditors have been so insistent on the beleaguered country keeping up the terms of its original bailout is the likelihood of anti-austerity sentiment spreading to the voters of other nations. Today there was a reminder that’s probably not far off the mark, with Portugal’s Socialist Party vowing to roll back austerity if elected in the country’s national elections this year.
Shares of UBS Group AG (NYSE:UBS) rose to their highest since 2008 after the Swiss banking behemoth agreed to pay US authorities $545m in fines, fanning hopes that the regulatory clampdown on its past LIBOR and FX manipulation is drawing to a close.
An unsurprisingly dovish set of Bank of England minutes indicating the central bank was unlikely to hike rates anytime soon, resulting in increased borrowing costs for businesses was broadly supportive of UK stocks on Wednesday.
The FTSE 100 chopped around the 7000 level as it has done all this week with takeover murmurs, lower rates for longer and strong company results all broadly supportive of higher prices so long as the Federal Reserve doesn’t throw any “curve balls” in its minutes.
Vodafone (LONDON:VOD) was a top riser on possible bid interest from Liberty Global (NASDAQ:LBTYA). After dipping on the open, Marks and Spencer (LONDON:MKS) shares moved higher after the company reported increased profitability and a £150bn dividend.
Mondi (LONDON:MNDI) was a star performer within the basic materials sector, jumping to record highs after first quarter profits exceeded expectations. Falling SSE (LONDON:SSE) shares were a drag on the FTSE, despite 24% annual profit growth, the company lost a staggering half a million customers on the increased use of switching services by energy customers.
US
US markets were quiet leading into the release of the much anticipated Federal Reserve minutes later in the session. Yahoo! (NASDAQ:YHOO) shares gained back around half of yesterday’s losses after the company argued any change in IRS law pertaining to spin-offs would not impact its Alibaba (NYSE:BABA) shares sale.
The Federal Reserve minutes are now out-of-date but there are some broader issues it could bring up. If the Fed were to voice concern over the strength of the dollar or international concerns with Greece so close to the edge, the dollar’s comeback over the past two days could really kick in.
FX
The dollar continued the trend of the past two days and was up modestly leading into the FOMC minutes despite the general consensus of a more dovish outlook from Fed members.
The British pound was up after dovish Bank of England minutes largely fell in line with expectations and information from last week’s inflation report. EUR/GBP is now back down to 0.712 which has supported the currency pair since the middle of March
There was still residual weakness in the euro from ECBs front-loading of bond purchases with bearish sentiment helped along by weaker than expected German PPI data. EUR/USD got a brief pop of 1.11 but couldn’t hold onto gains.
The Japanese yen was flat alongside US treasury yields despite better Japanese GDP data reported overnight.
Commodities
Short-covering in Gold and Silver after a big sell-off yesterday offered some support to the precious metals heading into Fed minutes.
Crude oil snapped back higher after a five-day losing-streak as US oil inventories showed a bigger than expected weekly drawdown of 2.7M.
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