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GLOBAL MARKETS-ECB goes easy; Brexit goes sour

Published 12/10/2020, 09:47 PM
Updated 12/10/2020, 09:50 PM
© Reuters.

* Uncertainty around Brexit and stimulus keeps investors
sidelined
* ECB expands and extends emergency COVID stimulus as
expected
* Uncertainly remains over U.S. stimulus
* S&P Dow Jones ejects some Chinese firms from indices

By Marc Jones
LONDON, Dec 10 (Reuters) - A generous extra helping of
European Central Bank stimulus lifted the euro and kept Europe's
stock markets steady on Thursday, but Britain's pound saw its
biggest drop in almost a month after overnight Brexit talks
turned sour.
It had been a mixed session for Asia amid a surge in
coronavirus cases and the ejection of some Chinese stocks from
S&P Dow Jones' indices, so the sight of the ECB cranking open
the money taps again kept markets on track ahead of the bank's
news conference. The euro, which has risen nearly 14% since March, inched
higher and though the pan-European STOXX 600 index .STOXX
barely budged, London's FTSE 100 .FTSE was on course for its
eighth straight gain as the Brexit uncertainty pushed the pound
down 0.8% to just under $1.33 GBP= and 90.95 pence per euro
EURGBP= . /FRX
European Union and British leaders gave themselves until the
end of the weekend to seal a new trade pact, with some $1
trillion in annual trade at risk of tariffs if they can't reach
a deal by Dec. 31, when transition arrangements end.
"There's still clearly some scope to keep talking, but there
are significant points of difference that remain," Foreign
Secretary Dominic Raab told BBC TV. "(On) Sunday, they need to
take stock and decide on the future of negotiations."
The ECB increased the overall size of its PEPP stimulus
programme by 500 billion euros to 1.85 trillion euros, in line
with market expectations. It also extended the scheme by 9
months to March 2022, with the aim of keeping government and
corporate borrowing costs at record lows. ECB chief Christine Lagarde was starting a news conference
to explain the move, with traders also waiting to hear if the
bank is starting to get uncomfortable about the scale and pace
of the euro's rise.
"For the most part the ECB delivered on reasonable
expectations," TD Securities' European Head of Currency
Strategy, Ned Rumpeltin, said.
"We have seen a bit of bid pop up in the euro but nothing
major.... What matters now is what Lagarde says and how she says
it. Especially about the euro's strength beyond the standard
boiler plate language."
Euro zone government bond yields - which move inversely to
price - continued to fall. Italian 10-year yields IT10YT=RR
touched to a record low of 0.53%. Spain and Portugal's hit
0.013% and -0.022% respectively. GVD/EUR

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TECH GLITCH
In Asian trading, MSCI's broadest index for the region
.MIAP00000PUS eased 0.4%, with Japan's Nikkei .N225 ending
0.2% lower. Both are up more than 60% from March lows.
S&P 500 futures EScv1 were holding 0.1% higher, however,
after the Nasdaq .IXIC dropped 2% on Wednesday, when U.S.
regulators filed lawsuits against Facebook FB.O alleging the
company used its dominance to buy or crush rivals, harming
competition. S&P Dow Jones Indices then said it would remove 10 Chinese
companies from its equities indices and several others from its
bond indices overnight. It followed a move by Donald Trump's
outgoing administration to ban U.S. investors from buying
certain Chinese securities.
U.S. lawmakers were also unable to sort out disagreements
over aid to state and local governments that are holding up a
broader spending package, though they did at least approve a
stop-gap government funding bill. "We've risen so far so fast that it's making investors
cautious," said Michael McCarthy, chief strategist at
stockbroker CMC Markets in Sydney.
"The fall in tech stocks was a bit of a concern, given that
they've risen in all market weather over the last six weeks, so
to see them come off might signal that we're looking at a short-
term corrective move."
Elsewhere, faith in the recovery appeared to be holding up.
Brent oil futures LCOc1 were up 0.8% at $49.23 a barrel and
U.S. crude CLc1 was up 0.9% at $45.96 a barrel. O/R Gold
XAU= nursed losses at $1,839 an ounce. GOL/
The Hungarian forint and the Polish zloty made gains as hope
built that European Union leaders will work out a budget deal
the two eastern European countries have threatened to veto.
EMRG/FRX
"We think the market has certainly got confidence in the
sustainability of this recovery," said Shoqat Bunglawala, head
of global portfolio solutions for EMEA & APAC at Goldman Sachs
Asset Management.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
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Global currencies vs. dollar http://tmsnrt.rs/2egbfVh
Emerging markets http://tmsnrt.rs/2ihRugV
MSCI All Country Wolrd Index Market Cap http://tmsnrt.rs/2EmTD6j
Rebound of major world markets https://tmsnrt.rs/370lXbY
ECB to rein in euro? https://tmsnrt.rs/2I7c2b3
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