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

Published 2019-04-08, 08:14 a/m
© Reuters.  GLOBAL MARKETS-Investors hit pause as ECB and Brexit risks loom
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* 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 https://tmsnrt.rs/2I5yaRq

* Graphic: World FX rates in 2018 http://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 .MIWD00000PUS 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 ESc1 and Nasdaq NQc1 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. 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. DAX .GDAXI 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. 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. 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 (NYSE:MS) strategists.

Currency markets were also distinctly risk-averse.

The dollar slipped 0.2 percent to 97.205 .DXY against a basket of currencies. The euro EUR=EBS inched up 0.2 percent but hovered near a one-month low at $1.1229 ahead of the ECB meeting later this week. held just above $1.3 GBP=D3 as a crucial week for Britain's negotiations to exit the European Union loomed. 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. MET/L

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. crude CLc1 was last up 20 cents at $63.28 a barrel, while Brent crude LCOc1 futures rose 19 cents to $70.55.

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