European stocks soft as US futures dip

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The last day of the quarter sees a rash of national and regional consumer prices data released, with traders keen to gauge the extent to which inflation trends are consistent with the predominantly highly accommodative monetary policies of major central banks.

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Of particular interest is the eurozone, where the “flash” harmonised index of consumer prices (HICP) for February came in at 1.5 per cent, retreating from 2 per cent in January and lower than the 1.8 per cent expected by analysts.

The pull back in headline inflation is seen helping the European Central Bank to maintain its negative interest rate policy and ongoing quantitative easing.

A report from Reuters this week said ECB members wished to challenge investors’ perception that the monetary guardian was looking to tighten policy anytime soon, news which put the euro and government bond yields under pressure.

Following the inflation data the euro is up 0.2 per cent at .0690 and the benchmark 10-year German Bund yield, which moves opposite to the bond price, is adding 1bp at 0.34 as the market also absorbs earlier news that German February retail sales rose 1.8 per cent month-on-month.

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South African financial assets are under severe pressure after president Jacob Zuma dismissed finance minister Pravin Gordhan, prompting fears of imminent downgrades to the country’s credit rating.

The rand is sliding 1.3 per cent to 13.4546, taking its losses over the week to 8.4 per cent as investors express concerns that Mr Gordhan’s replacement, home affairs minister Malusi Gigaba, has no finance or business sector experience.

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The FTSE/JSE Africa Banks Index is down 5.2 per cent, its biggest one-day drop since December 2015, and the country’s 10-year government bond prices are stumbling, pushing yields up 33 basis points to 8.84 per cent.

What to watch

A busy day for economic reports is completed by a flurry of data out of the US.

Personal income and spending are due for release at 13:30 BST alongside a closely watched prices gauge, the PCE deflator — both covering February.

The Chicago purchasing managers’ index for March is on the slate for 14:45 BST, followed quarter of an hour later by the University of Michigan consumer sentiment index, also surveying this month.

As traders wait for the data the policy-sensitive 2-year US government bond yield is steady at 1.29 per cent and the 10-year benchmark Treasury is gaining 1bp to 2.43 per cent.

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Hong Kong’s Hang Seng index lost 0.8 per cent and Australia’s S&P/ASX 200 shed 0.5 per cent, with banking stocks coming under pressure as the country’s prudential watchdog tightened mortgage-lending rules for interest-only borrowers.

The Shanghai Composite gained 0.4 per cent, taking the Chinese benchmark off a six-week low following a four day losing streak that came amid concerns that Beijing was draining liquidity from the financial system to suppress speculative excess.

Although shares are not seen as particularly sensitive to economic data, some economy watchers are likely to have taken heart at an official survey showing activity in China’s manufacturing sector climbed to its highest since 2012.

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