April 8, 2019 / 12:16 PM / 2 months ago

GLOBAL MARKETS-Investors hit pause as ECB and Brexit risks loom

    * World stocks hit 6-month high
    * STOXX, DAX slip as Germany trade data weighs on sentiment 
    * Greece 10-year bond yields near 13-year lows
    * Graphic: World earnings growth expectations tmsnrt.rs/2I5yaRq
    * Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh

    By Helen Reid
    April 8 - World stocks faltered at six-month highs and U.S.
markets were set to dip on Monday as flashpoints including a
crucial Brexit summit and a European Central Bank meeting loomed
and investors looked ahead to an earnings season that may be
disappointing.
    Signs of further stimulus from China helped Asian shares
touch seven-month highs, but investors' enthusiasm was fleeting.
    MSCI's world equity index inched up 0.1
percent, at six-month highs while European stocks slipped as
weak data from Germany and investor caution ahead of a string of
political and monetary policy events held the market back.
    Futures for the S&P 500 and Nasdaq eased 0.1
percent, indicating a weaker start on Wall Street. 
    In a document published on the central government's website
late on Sunday, Beijing said it would step up a policy of
targeted cuts to banks' required reserve ratios to encourage
financing for small and medium-sized businesses.
    German exports and imports both fell more than expected in
February, data showed on Monday, in the latest sign that
Europe's largest economy will likely have meagre growth in the
first quarter amid increased headwinds from abroad.
    Germany's DAX fell 0.3 percent, while traders said
volumes were very low for this time of day. "Feels very much
like a buyers' strike," said one dealer.
    Markets have had a stellar first quarter, the best in more
than eight years for the MSCI All-Country World index.
    "Today’s very minor move down has to be seen in light of
recent developments," said Britta Weidenbach, head of European
equities at DWS. 
    "We're back at the levels where the correction started last
year. So now the question certainly is, what's next?"
    The European Central Bank will update the market on
Wednesday, the same day as a crucial European Union Summit on
Brexit, while China and the EU will hold a summit on trade on
Tuesday.
    "European institutions will be under the spotlight in the
coming days as they attempt to display proactivity in trade
negotiations, on Brexit and in monetary policy," wrote
economists at Swiss private bank Landolt & Cie in a note to
clients. 
    Bond markets were being squeezed by investors' search for
yield after benchmark German Bunds fell into negative territory.
    Greece's 10-year government bond yields were within a shade
of their lowest level in over 13 years as a cocktail of positive
headlines boosted sentiment towards the country and zero percent
Bund yields push investors to riskier investments.
   
    REALITY CHECK
    The first-quarter earnings season, which kicks off at the
end of this week with U.S. banks reporting, is likely to be a
reality check for investors.
    Analysts have already slashed their earnings expectations
for this year, which are now stabilising around 4.2 percent
growth for world stocks.
    "A large gap between the improvement in market prices and
the more modest uptick in underlying data increases the
‘pressure to deliver’, especially for 1Q earnings, where we
think US numbers will disappoint," wrote Morgan Stanley
strategists. 
    Currency markets were also distinctly risk-averse.
    The dollar slipped 0.2 percent to 97.205 against a
basket of currencies. The euro inched up 0.2 percent
but hovered near a one-month low at $1.1229 ahead of the ECB
meeting later this week.
    Sterling held just above $1.3 as a crucial week for
Britain's negotiations to exit the European Union loomed.

    Prime Minister Theresa May must come up with a new plan to
secure a delay from EU leaders at a summit on Wednesday.
    Commodities markets were the exception, rallying strongly.
    Copper prices rose on news of fresh stimulus measures in top
metals consumer China and hopes for a U.S.-China trade
deal.
    Oil prices climbed to their highest levels since Nov. 2018,
driven by OPEC's ongoing supply cuts, U.S. sanctions against
Iran and Venezuela, and fighting in Libya.
    U.S. crude was last up 20 cents at $63.28 a barrel,
while Brent crude futures rose 19 cents to $70.55.
 
 
 
    
 (Reporting by Helen Reid
Editing by Hugh Lawson and Frances Kerry)
  
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