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GLOBAL MARKETS-Stocks choppy, Kiwi soars after rate cut

Published 2016-08-11, 05:54 a/m
© Reuters.  GLOBAL MARKETS-Stocks choppy, Kiwi soars after rate cut
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* NZ dollar jumps as rate cut underwhelms

* World stocks close to one-year highs

* Yuan steady to mark 1-year devaluation anniversary

* Oil slips after data shows surprising jump in stockpiles

By Marc Jones

LONDON, Aug 11 (Reuters) - World shares hovered close to one-year highs on Thursday as oil prices dropped for a third straight day and the latest interest rate cut in a developed market - this time New Zealand - got a lukewarm reaction from investors.

The slip in crude markets left energy firms backpeddling, weighing on European equities .FTEU3 which, after early declines, nudged higher on sharp gains by consumer goods stocks. Asia and Wall Street had drifted lower overnight .N .

The Kiwi dollar NZD=D3 was the big mover as a smaller-than-expected quarter-point cut from the country's central bank left those who had been betting on a more aggressive move caught short. bounded more than 1 percent higher to $0.7351, its highest level since May 2015 before edging back slightly to $0.7275.

"The RNBZ obviously cut rates but it didn't quite live up to expectations," said head of global macro strategy at State Street Global Markets. Michael Metcalfe.

"It is a theme we have had a couple of times this year and is part of these ongoing questions about the efficacy of central bank policy."

Those issues surfaced in Scandinavia too, where Sweden's crown hit a seven-week high against the euro EURSEK=D4 as stronger-than-expected inflation fed doubts about further easing there, a day after comparable Norwegian data showed something similar.

Currency markets' broader focus remained on whether U.S. interest rates will rise this year, with traders looking ahead to a number of speeches by Federal Reserve officials culminating in Fed Chair Janet Yellen's Aug. 26 address at the Jackson Hole symposium.

The dollar index, which measures its value against a basket of six major currencies, was at 95.665 .DXY , holding close to a near one-week low of 95.442 with the euro also slightly weaker at $1.1165 EUR= .

"A Fed rate hike still seems like a long-term prospect in the current markets and we would expect that the carry-seeking behaviour will continue to support the Antipodean currencies," analysts at Credit Agricole (PA:CAGR) said in a note, referring to the Australian and New Zealand dollars.

GREAT FALL OF CHINA

Markets were also marking the one-year anniversary of China devalued the yuan, a move that roiled global markets.

The Chinese currency was fixed a touch higher by the People's Bank of China in Beijing although it softened a touch in spot markets during the day. CNY/

It has dropped 8 percent against the dollar since last year's landmark devaluation and more than 10 percent against a broader list of world currencies the PBOC monitors.

"I still think the investors are trying to hang in there for the rally and while the general opinion seems to be that the Chinese authorities have steadied the ship, it is still a bit too early to draw that conclusion," said Cliff Tan, Bank of Tokyo-Mitsubishi UFJ's east Asia head of global markets research.

Risk appetite was kept in check as Brent oil prices sank back to $43.60 a barrel on news of a surprising jump in U.S. government stockpiles and as Singapore, Asia's bellwether for trade, cut its economic forecast for the year. O/R

Europe's energy sector .SXEP was among the worst-performing of the major equity groups, falling 0.6 percent. But gains in consumer goods stocks including Adidas ADSGn.DE and Henkel HNKGn_p.DE - which hit a record high after posting strong results - helped the pan-regional FTSEurofirst 300 .FTEU3 edge up 0.35 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.5 percent. It hit a one-year high on Wednesday and since end-June has broadly outperformed the MSCI world index .MIWO00000PUS , which traded flat.

Hong Kong .HSI and Indonesia .JKSE led regional gainers in trade. Japan's markets .N225 are closed for a holiday.

In bond markets, strong demand for government debt at auctions continued to hold down yields. yield on the benchmark 10-year Treasury note US10YT=RR extended a recent fall to 1.508 percent while the yield on 10-year UK gilts tumbled to a record low of 0.52 percent.

Spanish government bond yields also hit a record trough as acting prime minister Mariano Rajoy edged closer to securing a second term in office, which would end a near eight-month political deadlock. benchmark yields hit 0.944 percent and were at the tightest spread all year to German equivalents at 112 basis points, according to Tradeweb data.

Low-rated euro zone government bonds have rallied broadly this week on expectations that the European Central Bank will move further down the ratings spectrum to fulfil its asset purchase programme.

"Spain is clearly below the 1 percent mark now, partly on hopes that the political risks have come down and that a third election could be avoided," said Christoph Rieger, rates strategist for Commerzbank (DE:CBKG).

(Additional Reporting by Abhinav Ramnarayan Anirban Nag and Sudip Kar-Gupta; editing by John Stonestreet)

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