December 19, 2019 / 8:54 AM / 3 months ago

Daily Briefing: Central banks' year-end sweep

LONDON (Reuters) - With the expected overnight impeachment of U.S. President Donald Trump a cause for pause in world markets rather than a jolt - as it is unlikely to succeed in removing him from office - investor attention turned on Thursday to the last big central bank set pieces of 2019.

FILE PHOTO: Mark Carney, Governor of the Bank of England, takes a drink during a Bank of England Financial Stability Report news conference in London, December 16, 2019. Kirsty Wigglesworth/Pool via REUTERS

A relatively downbeat Bank of Japan kept policy unchanged there earlier and the results of the Bank of England’s first post-election meeting will grab much of the headlines later.

But an interest rate rise from Sweden’s Riksbank is arguably the most interesting move as the Swedish central bank becomes the first to claw its way back out of negative rates - a milestone that could start to raise speculation about when the European Central Bank and other sub-zero rate setters will follow.

The crown, which as appreciated more than 4% against the euro in the fourth quarter, was steady to firmer ahead of what was seen as a well-flagged rise.

Norway’s crown, which has strengthened considerably from the record lows it set in October, also faces its latest central bank decision there but no change in policy is expected.

For sterling, which has been whiplashed since last week’s election - from the initial euphoria over a win for the ruling Conservatives to its biggest 2-day drop in two years on a return of ‘no deal’ Brexit fears - the Bank of England meeting will about signalling rather than any change of policy.

The pound firmed up a touch early Thursday after this week’s heavy selloff, with global banks such as JPMorgan putting an “uncomfortably high” 25% probability on Britain ending its Brexit transition period in December 2020 without a subsequent trade deal with the European Union in place.

The Bank of England has been largely on hold through the Brexit brinkmanship and election campaign of the latter half of this year, but two members of its policymaking council did vote to cut interest rates at its November meeting and markets will watch closely to see if those ranks swelled this week.

British inflation remained at a three-year low in November, comfortably below the Bank of England's 2% target, according to data released on Wednesday. There will, however, be as much speculation about a changing of the guard at the BoE as governor Carney is due to leave next month and his successor could be announced by the new government as soon as Friday.

Also there will be some discussion about how banks are switching away from their use of the Libor interbank lending rate benchmark. BoE Deputy Governor Sam Woods said on Wednesday he would meet banks in the first quarter of 2020 to check on whether regulations are hampering their ability to ditch the use of the Libor. UK retail sales numbers are also due out later.

Elsewhere, analysts cite reports on Wednesday suggesting that the ECB will lift restrictions on Greek banks’ holdings of domestic government debt as a trigger for an outperformance of Greek bonds. Turkey’s lira skidded further, hitting 7-month lows on U.S. sanctions worries despite reports of intervention to slow its decline.

More broadly, European stocks opened steady to higher after a slightly negative close on Wall St overnight. Asia’s major bourses were flat to slightly lower. U.S. stock futures and 10-year Treasuries were flat also, with dollar slightly weaker.

On the European corporate news front, traders called Clariant shares 4% higher after the Swiss speciality chemicals plans to payout shareholders $1 billion from the sale of its Masterbatches unit.

Britain’s state-backed RBS is in spotlight after the bank's new CEO Alison Rose removed top management at its under-performing investment bank NatWest Markets.

In the luxury space, Swiss watchmakers Swatch and Richemont were seen falling 1% to 2% after November watch exports data showed demand weakening further.

Chipmakers are likely to shine on Micron Technology's positive comments on the industry's recovery and on news that it received all requested licenses to supply some products to its largest customer, China's Huawei. A welcome change to the industry that was roiled by Washington placing Huawei on a so-called entity list in May, citing national security concerns.

Another UK stock of interest is Playtech after The Times reported that activist investor Springowl has raised corporate governance concerns at the gambling software supplier. 

— A look at the day ahead from EMEA markets editor Mike Dolan. The views expressed are his own —

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below