Euro at two-year high, Asian shares barely budge

TOKYO (Reuters): The euro held near two-year highs against the dollar on Friday after the head of the European Central Bank said tapering of its stimulus will be on the table this autumn, while a solid global economic outlook kept Asian share prices near decade highs.

Although ECB President Mario Draghi set no date for changes to the bond-buying plan, investors took his comments on Thursday as confirming their expectations that the discussions would lead to monetary tightening next year.

By late Asian trade, the euro stood at $1.1630, maintaining its 1% gain on Thursday, its biggest since June 27, when Draghi first sparked expectations that the ECB will dial back its bond buying scheme.

Signs of steady global growth, which have prompted the ECB and a couple of other major central banks to signal future tightening since last month, have kept the world’s shares on firm footing.

European shares are expected to be flat to slightly lower, with spread betters looking at a flat opening in Britain’s FTSE and a 0.1% fall in Germany’s DAX and France’s CAC.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan, which has gained about 5% in the past two weeks, eased 0.2% on Friday, dragged down by fall in material and financial shares.

Japan’s Nikkei dropped 0.2%.

MSCI’s gauge of stocks across the globe was down slightly after rising for a 10th straight session on Thursday, its longest such streak since February 2015. It has advanced 3.1% in the latest rally.

US quarterly earnings are expected to have climbed 8.6%, above the 8% rise projected at the start of the month, according to Thomson Reuters I/B/E/S. About 15% of S&P 500 companies having posted results so far.  Still, the major US indexes were almost flat on Thursday, not helped by concerns about US President Donald Trump’s inability to push his through healthcare reform bills, the passage of which will be needed to finance his tax cut plans.

The dollar was also dogged by similar concerns, with its index against a basket of major six currencies hitting its lowest level since August on Thursday. It last stood at 94.22, compared to Thursday’s low of 94.09.

Against the yen, the US currency hit a three-week low of 111.48 yen on Thursday even after the Bank of Japan Governor Haruhiko Kuroda dropped no hint of following other central banks in curtailing many years of stimulus. It last stood at 111.92 yen.

While the euro gained sharply on Draghi’s comments, global bond markets reacted more calmly, partly as he did not give a clear signal on when the ECB will announce its tapering.

The 10-year US Treasuries yield dropped to 2.238%, its lowest in three weeks, on Thursday and last stood at 2.261%.

The 10-year German Bund yield held at 0.537%, little changed from its levels before Draghi’s news conference.