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Euro Rebounds on Upbeat Data –Upate

By Josie Cox

A solid run of European data supported the euro on Monday.

Early in the day, the currency took a hit from the buoyant dollar, which climbed close to an 11-year high against a number of major currencies after Beijing’s decision over the weekend to cut interest rates for the second time in less than four months, highlighting the gap in interest-rate policy between the U.S. and the rest of the world.

But the euro later recovered, climbing by 0.3% against the buck to $ 1.1230 after figures from data provider Markit showed that the eurozone purchasing manufacturer’s index was 51.0 for February, holding steady from an initial reading. The region’s jobless rate, meanwhile, fell to its lowest level since early 2012.

“In our view, a weaker euro, lower oil prices, a better economic environment and accommodative monetary policy should support confidence in the coming months,” Barclays economist Apolline Menut wrote.

China’s central bank lowered the country’s benchmark one-year loan rate and one-year deposit rate by a quarter of a percentage point to 5.35% and 2.5%, respectively.

The central bank singled out rising deflationary pressure as a trigger for its action, saying that plunging commodity prices world-wide “provided room” to spur growth by lowering interest rates.

China now joins countries in the eurozone and Japan in easing monetary policies due to deflationary pressure, while the U.S. Federal Reserve is moving toward raising interest rates as America’s economy recovers.

“The feed-through to risk taking [in response to the Chinese rate cut] by the markets at the start of the week has been limited,” noted analysts at BNP Paribas. Even the Australian dollar, which typically climbs on shifts to easier monetary policy in China because of the two countries’ close trading links, didn’t rally.

Elsewhere, Russian markets shrugged off news that opposition leader and outspoken critic of the government Boris Nemtsov was gunned down on a bridge next to the Kremlin late Friday.

The ruble, which has now tumbled close to 40% over the last six months against the dollar, burdened by Western sanctions and geopolitical turmoil, was trading a modest 2% lower against the greenback on Monday. One dollar now fetches just over 62 rubles.

Some analysts warned of the long-term risks of investing in Russia. But many were more sanguine. “I don’t think that even a figure like Mr. Nemtsov could be a real threat to [Russian President Vladimir] Putin, so this doesn’t really change the political landscape,” said Viktor Szabo, senior investment manager at Aberdeen Asset Management.

“We still think that fundamentally Russia isn’t a ‘junk’ country. It has the means to service its debt and has displayed sensible crisis management,” he added.

Russia’s Micex stock index traded 1.5% higher, according to the Moscow Exchange’s website midmorning Monday, while the dollar-denominated RTS Index was 1.1% higher on the day.

In commodity markets, Brent crude suffered a fresh slide to trade 1.1% lower on the day at $ 61.92 per barrel. Gold was 0.3% higher at around $ 1,216 per troy ounce. The S&P 500 in the U.S. was indicated opening 0.1% higher at 2,105. Futures, however, don’t necessarily reflect moves after the opening bell.

Write to Josie Cox at [email protected]

    (END) Dow Jones Newswires   03-02-150743ET   Copyright (c) 2015 Dow Jones & Company, Inc. 

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