Better-than-expected trade numbers from China kept Asian stock markets near one-year peaks on Thursday while helping prod those in Europe higher ahead of a European Central Bank decision that may hint at, or even deliver, more monetary stimulus.
The first annual rise in Chinese imports since late 2014 was a welcome fillip but came after a mixed bag of data which may add to the pressure on Frankfurt to do yet more to stimulate a struggling euro zone economy.
Nearly all analysts polled by Reuters expect ECB rates to remain unchanged on Thursday, though there is speculation that President Mario Draghi will announce an extension of its €80 billion of monthly asset buys.
If the central bank were to make that call, it would likely reinforce speculation of more easing before year-end, although the jury is definitely out on whether that would do much to weaken the euro - trading at a two-week high of $1.1279 on Thursday.
“If the ECB really wants to weaken the euro, it would have to surprise on the expansionary side and it would probably have to deliver something new - not just an extension of QE or another rate cut even,” said Commerzbank currency strategist Thu Lan Nguyen, in Frankfurt.
“Those are the measures the market already knows, and the market knows they haven't really helped in the last couple of years to bring inflation back to target.”
Fed rate hike
The generally shaky economic outlook may, on balance, be a positive for riskier investments like stocks and emerging markets if the end result is to stave off another rise in US Federal Reserve interest rates.
While the Fed is moving at a snail’s pace - one quarter point rate rise so far in almost three years of speculation - a move this month or a clear signal one is coming before year-end would still be a shock to investors who have become dependent on funding that costs effectively nothing.
Europe’s major markets were steady to a touch higher in early trade. London’s FTSE 100 gained half a per cent, helped by a solid gain for banking stocks.
Asia-Pacific shares
MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.1 per cent on the day, just short of peaks hit during the day on Wednesday.
With the Fed heading in the opposite direction, new rounds of money-printing to support the broad buying of assets that has pushed stocks higher and many government bond yields deep into negative territory will have to come from the ECB and the Bank of Japan.
“Draghi isn't anywhere near to achieving his goals, and he might very well continue to assure the market that there might be more to come and that he still has tools available to boost growth,” said Markus Huber, trader at City of London Markets Limited.
BOJ policy stance
The yen, pushed higher over the summer by the belief that the Bank of Japan has little left in its armoury to weaken the currency, firmed another 0.2 per cent to 101.67 per dollar .
BOJ Deputy Governor Hiroshi Nakaso said the bank would not conduct policy to effect the yen.