* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Marc Jones
LONDON, March 23 Stocks and sterling held their
ground on Thursday as markets took the latest European terror
attack, this time in London, one of the world's financial
capitals, largely in their stride.
The FTSEurofirst 300 barely budged as London
, Frankfurt and Paris started flat and
the pound fared better than most as the dollar began to
muscle higher again in the currency markets.
The history of these attacks, including those in France,
Germany and Belgium last year as well those in London and Madrid
more than 10 years ago, show little lasting impact on economic
confidence or financial markets in isolation.
Having weakened as much as 0.4 percent after news of the
London attack which killed five, sterling
held steady overnight and then climbed swiftly above $1.25 after
more-resilient-than-expected UK retail sales data
The dollar was also creeping higher again with
attention firmly on Donald Trump's first significant U.S. policy
test, as he looks to gets a healthcare bill passed in U.S.
"What we are getting this week is a questioning of how much
of the risk rally is predicated on future Trump policy," said
Michael Metcalfe, head of global macro strategy at State Street
"There are concerns that this vote (on healthcare reform)
will be a litmus test of how much fiscal expansion he can get
After losing 3.5 percent in the past 10 days, the dollar was
roughly steady at 111.19 yen. It gained 0.1 percent to $1.0786
per euro and up 0.15 percent against the basket of currencies
used to measure its broader strength.
The euro and euro zone bond markets' focus was also on what
the European Central Bank hopes will be its last offering of
cheap, 3-year 'TLTRO' funding, once its main crisis fighting
Money market traders polled by Reuters expect banks to take
125 billion euros at the ECB operation although forecasts range
widely from 50 billion to 300 billion euros.
Yields, which move inversely to prices, on Portuguese
, Spanish and Italian
debt fell 1-3 basis points ahead of the handout, continuing
along with French bonds to close the spread on German Bunds.
The bigger question for markets though is will it matter
once these kinds of ECB loans are no longer available to banks.
From now on they will only be able to get either 1-week or
3-month loans from Frankfurt.
"Overall I do not think the absence of further longer-term
operations will make much of a difference," said Francesco
Papadia, the former head of ECB market operations who launched
the offerings back in late 2011.
"LTROs (long term lending operations) are among the easiest
measures to take, much easier than QE, so if there was a need
for them the ECB Governing Council would not have too much of a
problem in reinstating them."
Overnight in Asia MSCI's broadest index of Asia-Pacific
shares outside Japan advanced 0.2 percent.
Japan's Nikkei closed 0.2 percent higher, as a
weaker yen offset a political scandal over the relationship of
Prime Minister Shinzo Abe and his wife with a Japanese
nationalist education group that bought state-owned
China's CSI 300 rose early on hopes that index
compiler MSCI may include A-shares in its indices, but those
gains were lost as money began flowing out of the mainland
market through link to the Hong Kong exchange.
Wall Street futures were pointing to modest gains later too.
On Wednesday the Nasdaq jumped 0.5 percent and the S&P
500 closed 0.2 percent higher, while the Dow Jones
was flat, after all three touched their lowest levels in about
five weeks earlier in the session.
Trump has been trying to rally support for his plan to
repeal the 2010 Affordable Care Act, Democratic former president
Barack Obama's signature healthcare legislation.
Trump and Republican leaders of the House of Representatives
have said they were making progress in their efforts to win over
conservative Republicans who have demanded changes to the
legislation. They plan a vote on the bill, Trump's first major
legislation since he took office, later on Thursday.
"If he can't push through the bill, it would further damage
stocks. It also raises the risk of his other policies, like tax
cuts, being delayed," said Masafumi Yamamoto, chief forex
strategist at Mizuho Securities in Tokyo.
With several major currency pairs steadying after a week of
losses for the dollar, the biggest mover of the day was
Australia's dollar, down half a percent on the back of
nerves in China's money market and a slump in prices for its
iron ore exports.
The New Zealand dollar was steady at $0.7046 after
its central bank held interest rates at a record low 1.75
percent, and reiterated it would remain there for a
"considerable" period of time.
In commodities markets, gold dipped lower and oil
prices rebounded, after touching their lowest level since
November overnight on data that showed U.S. inventories, already
at a record high, grew by far more than forecast.
Analysts said oil had found technical support and was being
pushed up as traders took new long positions after the overnight
low, but supply concerns kept the gains in check.
U.S. crude added 0.75 percent to $48.40 a barrel and
global benchmark Brent climbed 0.7 percent to $50.99.
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Nichola Saminather in Singapore;
editing by Richard Lough)