* German exports slump
* ECB disappointment lingers
* Fed's Brainard catches attention
By Jamie McGeever
LONDON, Sept 9 European stocks fell and bond
yields rose on Friday, driven by German trade figures that cast
doubt on the strength of the euro zone's largest economy and
lingering disappointment after the European Central Bank's
policy meeting the previous day.
German exports fell sharply in July, shrinking the overall
trade surplus for the fourth consecutive month -- something not
seen since 1992 -- and putting the continent's benchmark stock
index on course for its first weekly fall in three.
The nervy tone was set earlier in the day when Asian markets
extended losses after North Korea conducted its fifth and most
powerful nuclear test, while investors are keenly awaiting a
speech on Monday by U.S. policymaker Lael Brainard.
Europe's FTSEuroFirst 300 index of leading shares was down
0.3 percent at 1,370 points, dragging it down 0.7
percent on the week.
Germany's DAX fell 0.4 percent, and France's CAC 40
and Britain's FTSE 100 were both down 0.3
percent, while U.S. futures pointed to a fall of around 0.2
percent at the open on Wall Street.
"The month of July was clearly not a good month for
Germany," ING economist Carsten Brzeski said.
"A further cooling of the economy in the months ahead should
give more support to just-started discussions about fiscal
On Thursday, ECB President Mario Draghi, speaking after the
central bank kept its policy on hold as expected, said the ECB
was looking at options to continue its money-printing programme,
but maintained the March end-date for asset purchases.
That disappointed investors who were looking for more
immediate action, including an extension or expansion of the
current plan, or at least clearer hints of future actions.
MSCI's broadest index of Asia-Pacific shares outside Japan
dropped 1 percent, its biggest fall in over a
month, after touching a 13-month high on Thursday. The decline
shrank gains for the week to 2 percent.
Japan's Nikkei closed flat after pulling back
earlier on reports of the North Korean nuclear test. It was up
0.2 percent for the week.
North Korea's nuclear test set off a blast that was more
powerful than the bomb dropped on Hiroshima, with the nation
saying it had mastered the ability to mount a warhead on a
Overnight on Wall Street, the S&P 500 lost 0.22
percent, weighed down by a 2.6 percent fall in Apple on
disappointment over its latest iPhone, though gains in energy
shares offset losses in most other sectors.
European bond markets remained under pressure following the
ECB meeting, with the 10-year German Bund yield
rising around 3 basis points to minus 0.035 percent. It has
traded as low as minus 0.125 percent earlier this week.
U.S. bond yields also hovered around their highs of the
week, with the 10-year bond yield rising to 1.6210
The U.S. yield curve reached its steepest level in three
weeks at 84 basis points. That means the 10-year yield was 84
basis points higher than the two-year yield, a move driven by
the jump in longer-dated borrowing costs.
It was reported late on Thursday that Fed Governor Lael
Brainard will make a speech on the U.S. economy on Monday, just
before the blackout period for Fed officials ahead of the policy
meeting later in the month comes into effect.
Analysts agreed that this late addition to the Fed's
schedule is significant, but were split on how. Will Brainard
maintain her dovish stance on policy, or signal a hawkish shift
that could pave the way for a rate hike later in the month?
"As a dovish member (of the Fed's policymaking committee),
Brainard would carry a lot of credibility delivering a more
hawkish message," said Deutsche Bank's Peter Hooper, raising his
odds of a September rate hike to 50 percent from 40 percent.
In currency markets the euro climbed to $1.1280, and
the dollar retreated 0.3 percent to 102.145 yen.
Oil prices pulled back after surging more than 4 percent on
Thursday to two-week highs on a slump in U.S. Gulf Coast imports
to a record low led to a surprisingly large drawdown in U.S.
Brent pulled back 1.2 percent to $49.39, still up
5.5 percent this week, and U.S. crude retreated 1.1
percent to $47.07.
The weakness in the U.S. dollar this week has offered gold a
boost. Spot gold was last at $1,335 an ounce, up 0.8
percent this week, the biggest weekly gain in six weeks.
(Editing by Catherine Evans)