April 8, 2019 / 9:05 AM / 5 months ago

GLOBAL MARKETS-Investors hit pause as central bank and Brexit risks loom

    * World stocks stall after strong rally
    * German trade data weighs on sentiment 
    * Central bank and Brexit risks loom 
    * Greece 10-year bond yields near 13-year lows
    * Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh

    By Helen Reid
    April 8 - World stocks paused on Monday after a strong
recent run, as potential flashpoints including a crucial Brexit
summit and central bank meetings loomed, and investors began to
look ahead to an earnings season that may be disappointing.
    Signs of further stimulus from China helped Asian shares
touch seven-month highs, but investors' enthusiasm was fleeting.
    MSCI's world equity index was flat and
European stocks slipped 0.2 percent as weak data from Germany
and investor caution ahead of a string of political and monetary
policy events held the market back.
    In a document published on the central government's website
late on Sunday, Beijing said it would step up a policy of
targeted cuts to banks' required reserve ratios to encourage
financing for small and medium-sized businesses.
    German exports and imports both fell more than expected in
February, data showed on Monday, in the latest sign that
Europe's largest economy will likely have meagre growth in the
first quarter amid increased headwinds from abroad.
    Futures for the S&P 500 and Nasdaq eased 0.2
percent, indicating a weaker start on Wall Street. 
    Globally, stock markets have had a stellar first quarter.
The MSCI All-Country World index had its best quarter in more
than eight years.
    "Today’s very minor move down has to be seen in light of
recent developments," said Britta Weidenbach, head of European
equities at DWS. 
    "We're back at the levels where the correction started last
year. So now the question certainly is, what's next?"
    The European Central Bank will update the market on
Wednesday, the same day as a crucial European Union Summit on
Brexit, while China and the EU will hold a summit on trade on
Tuesday.
    "European institutions will be under the spotlight in the
coming days as they attempt to display proactivity in trade
negotiations, on Brexit and in monetary policy," wrote
economists at Swiss private bank Landolt & Cie in a note to
clients. 
    Bond markets were being squeezed by investors' search for
yield after benchmark German Bunds fell into negative territory.
    Greece's 10-year government bond yields were within a shade
of their lowest level in over 13 years as a cocktail of positive
headlines boosted sentiment towards the country and zero percent
Bund yields push investors to riskier investments.
    German bund yields traded at 1 basis point, just
holding in positive territory.
    
    REALITY CHECK
    The upcoming earnings season, which kicks off at the end of
this week with U.S. banks reporting, is likely to be a reality
check for markets.
    Analysts have already slashed their earnings expectations
for this year, which are now stabilising around 4.2 percent
growth for world stocks.
    "Q1 will definitely not be a good quarter for corporates,
and it might well be that the market turns back to fundamentals
whereas a lot of hope on China/U.S. trade deals and developments
on the interest rate front had driven markets up year-to-date,"
said DWS' Weidenbach.
    Currency markets were also distinctly risk-averse.
    The dollar slipped 0.1 percent to 97.269 against a
basket of currencies. The euro inched up 0.1 percent,
but hovered near a one-month low at $1.1229 ahead of the ECB
meeting later this week.
    Sterling inched up 0.2 percent to $1.3057 as a
crucial week for Britain's negotiations to exit the European
Union loomed. Prime Minister Theresa May must come up with a new
plan to secure a delay from EU leaders at a summit on Wednesday
as a deadline of this Friday draws ever closer.
    Commodities markets were the exception, rallying strongly.
    London copper prices rose as much as 1 percent on Monday,
snapping two days of declines, on expectations of more stimulus
measures in top metals consumer China and optimism over
Sino-U.S. trade talks.
    Oil prices rose to their highest levels since Nov. 2018,
driven by OPEC's ongoing supply cuts, U.S. sanctions against
Iran and Venezuela, and fighting in Libya.
    U.S. crude was last up 39 cents at $63.45 a barrel,
while Brent crude futures rose 42 cents to $70.76.
 
 
 
    
 (Reporting by Helen Reid, Editing by Hugh Lawson)
  
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