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Global Markets: Shares go weak as dollar extends power surge

Reuters  |  LONDON 

By Marc Jones

(Reuters) - World shares ground to a halt on Thursday as the dollar scored its longest winning streak since a hot run in early October that helped set off a wave of global 'bear' markets.

Some poor earnings and weak data out of ensured Europe's main bourses started lower and kept MSCI's main index of world stocks heading for only its second two-day run of falls of the year so far.

The extent of the current slowdown in the global was highlighted as unexpectedly cut its interest rates and the got hit to $1.1346 by Germany's fourth consecutive drop industrial output.

That only compounded the 1.3 percent the has lost over the last week and the tailwind behind the dollar, which has risen every day since Friday's strong U.S. jobs data. It has also recovered almost all the losses suffered after the Federal Reserve all but abandoned plans for more rate hikes last month.

"Another day, another piece of terrible German data. EUR/USD risks a move to $1.1300," said ING's and interest rate strategist,

Elsewhere the pound was struggling near $1.29 again ahead of a of England meeting, while gloomy jobs data saw New Zealand's dollar suffer a similar flop as its Australian counterpart had seen the previous day.

The kiwi slid to $0.6744, losing nearly 2 percent in the past 24 hours, as investors wagered on the risk of a cut in interest rates there. The country's central holds its first meeting of the year next week.

Asian trading was still light overall though with on holiday and no major economic data on the diary.

MSCI's broadest index of shares outside added 0.1 percent as it rose to its highest since early October.

The index has risen steadily since early January as the U.S. Federal Reserve changed its tune and emerging markets have surged more broadly after a torrid 2018.

Australia's benchmark stock index jumped 1.2 percent amid expectations of easy monetary policy after the country's central shifted away from his previous tightening bias.

Japan's Nikkei slipped 0.6 percent though and the caution quickly spread to

London's FTSE was the only major bourse clinging to positive territory whereas the rest were down at least 0.2 percent as were E-Mini futures for the S&P 500 and Dow.

WE'RE ALL DOVES NOW

One of the day's big surprises came from where its central bank unexpectedly lowered interest rates to 6.25 percent to boost a slowing after a sharp slide in the inflation rate.

Italy's bonds were back under pressure with the slashing its 2019 growth forecast.

agreed a deficit target of 2.04 percent in December, averting a major fall-out with the EU, though this was based on a growth assumption of 1.0 percent. Slowing growth in could make it harder for the country to remain within EU rules.

However, Benjamin Schroeder, at ING, said he did not expect the EU to demand more fiscal tightening from Italy, should its forecasts be reduced.

"The EU has another thing to deal with -- Brexit -- and the other thing is do you want to infuse the campaign ahead of the with this topic."

The next major trigger for markets will more likely be any breakthrough in the U.S.-Sino tariff talks when the two sides meet in next week.

U.S. offered little new to chew on in his State of the Union speech but said on Wednesday he and other U.S. officials will aim to clinch a deal next week to avert a March 2 increase in U.S. tariffs on Chinese goods.

Probably more pressing though for the U.S. markets is the threat of another government shutdown, Nick Twidale, an at said.

"With both sides of the house standing firm on the contentious border wall issue at present and the deadline approaching swiftly on Feb 15 we could be back where we were just a few weeks ago."

The broad dollar gains put pressure on gold, which eased to $1,303.96 per ounce, slipping further from last week's top of $1,326.30.

eased too after U.S. crude inventories rose and as production levels in the country held at record levels.

Brent crude futures slipped 23 cents to $62.46. U.S. crude eased 19 cents to $53.82 a barrel.

(Additional Reporting by and in Sydney and Virginia Furness and Tom Finn in London; Editing by Toby Chopra)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, February 07 2019. 16:17 IST
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