Euro gains as economy gathers pace

Bloomberg

The euro gained as European data boosted confidence in the region’s growth and a speech by ECB President Mario Draghi steered clear of any policy or currency comments to deter bulls. Gold and yen rose and stocks fell as remarks by President Trump provoked another bout of
investor caution.
The surprise increase in a gauge of euro-region manufacturing did little to help the Stoxx Europe 600 Index, which retreated led by WPP Plc after the world’s largest advertising company cut its revenue forecast. Trump’s threats to end the flagship North American trade agreement and shut down the government over funding for his Mexican wall drove futures on the S&P index lower, while European bond yields fell with those of Treasuries. Oil turned back toward $47 a barrel after U.S. gasoline stockpiles rose.
Surging demand for ‘Made in the Euro Area’ goods is feeding an economy that is creating jobs and finally also seeing price growth accelerate, providing some succor for ECB policy makers as they contemplate scaling back bond purchases. More clues about the path of monetary policy in Europe and the U.S. may emerge at the central bankers’ meeting starting in Jackson Hole.
“The euro area’s economic recovery is solid, broader and has further to run,” Bloomberg Intelligence economists led by Jamie Murray wrote in a report Wednesday. “The appreciation of the euro in recent quarters will act as a headwind to inflation and underlying cost pressure is weak. That means asset purchases should run into 2018, although a strong case can be made for slowing the pace of this program.” The yield on 10-year Treasuries fell three basis points to 2.19 percent. Germany’s 10-year yield dipped two basis points to 0.38 percent, its fifth consecutive decline on a closing basis. Britain’s 10-year yield declined three basis points to 1.06 percent, the lowest in more than seven weeks. West Texas Intermediate crude dipped 0.3 percent to $47.68 a barrel. Gold gained 0.4 percent to $1,290.48 an ounce.
On the other side of the Atlantic, Trump’s latest comments once again raised concerns about the administration’s ability to deliver on its fiscal plans, while heightening unease about the future of global trade.
“The Nafta hot air may be as much an excuse to take a step back after Wall Street’s surge yesterday, as it is a legitimate concern about the president not appreciating nuances of inter-dependence embedded in trade deals,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore. “The ‘she loves me, she loves me not’ thought process could lead to on-off markets.”
Geopolitical events continue to hover in the background. Trump said during his speech that North Korean leader Kim Jong Un is beginning to respect the U.S., the latest comments that suggest his administration is moving closer to seeking talks over Pyongyang’s nuclear arsenal. But the U.S. tightened its financial restrictions on North Korea, slapping sanctions on Chinese and Russian entities it accused of assisting Pyongyang’s development of nuclear weapons and ballistic missiles.
Combined sales of new (data Wednesday) and previously owned (Thursday) U.S. homes probably edged up in July from the prior month, indicating a still robust
real estate market held in check
by rising property prices, economists forecast.
The Stoxx Europe 600 Index sank 0.4 percent as of 8:36 a.m. in New York. Futures on the S&P 500 Index decreased 0.4 percent.
The U.K.’s FTSE 100 Index declined 0.1 percent. Germany’s DAX Index fell 0.4 percent.
The euro advanced 0.3 percent to $1.1802. The Bloomberg Dollar Spot Index declined 0.1 percent. The British pound dipped 0.1 percent to $1.281, the weakest in more than seven weeks. The Japanese yen climbed 0.5 percent to 109.06 per dollar. Japan’s Topix index rose 0.3 percent at the close, the Kospi index added 0.1 percent and Australia’s S&P/ASX 200 Index declined 0.2 percent. The Shanghai Composite Index fluctuated before slipping 0.1 percent. The MSCI Asia Pacific Index rose 0.2 percent. The Japanese yen climbed 0.4 percent to 109.17 per dollar.