Global Stocks Stay Subdued as Dollar Edges Higher

A stronger dollar and slightly higher global borrowing costs kept world shares subdued on Friday and left gold limping toward its worst week since December.

Europe’s main London, Frankfurt and Paris markets barely budged in early moves, keeping MSCI’s 47-country world index just in the black on the day but facing its third red week in the last four, Reuters reported.

Modest gains for the dollar meant the euro was set to post its second biggest weekly loss in nearly four months, as caution over the Italian election gave bond markets there their toughest week of 2018.

Polls point to a hung parliament in Italy, where no one party or coalition has an outright majority to form a government, and analysts expect a short-term volatility that could weigh on traditionally sensitive eurozone markets.

Italy’s 10-year bond yield was up 1 bps at 2.09%. It has risen about 10 basis points this week.

Broader global cross-asset issues remained much the same as they have during a choppy few weeks. How far and fast US interest rates can rise and what would it mean for global borrowing costs, risk appetite and business confidence.

That caution is reverberating in the bond markets with US yields rising by more than 50 basis points since early December, more than the 38 basis points for German government debt.

Benchmark treasury 10-year note yields rose to a four-year high of 2.957% on Wednesday though they were a shade down at 2.904% on Friday.

The backsliding also stalled the dollar’s overnight gains in Asia. It was virtually treading water against most major currencies by 0930 GMT, buying 106.8 yen and at $1.232 and $1.396 against the euro and pound. It was still up more than 1% for the week and headed for its third gain in the last four weeks.

Russian markets were readying for a big day with S&P Global due to review Moscow’s credit rating.

It is just one step away from returning Russia to the investment grade bracket that it ejected it from after the 2014-2015 slump in oil prices and Ukraine crisis. Its restatement would also see Russian foreign currency bonds return to some widely-tracked bond indices.

 Asia Trading

In Asian trading overnight, MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.9% on Friday to add to the previous week’s 3.9% gain.

It is still down more than 4% in February so far, however, after global equity markets were mauled at the start of the month by worries that inflation was picking up.

Japan’s Nikkei rose 0.7%, though China’s SSE Composite index and the blue-chip CSI300 both pared their early gains after the government seized control of acquisitive financial conglomerate Anbang Insurance.

Industrial metals such as copper eased as they headed for a small weekly drop and as trading slowly picked up again after Chinese markets had been shut following the Lunar New Year holiday.

Gold remained the stand-out mover though and looking increasingly less precious. Its spot market price was down 0.2% at $1,328, heading for a fifth session of falls in six. It has shed 1.6% this week, its biggest drop since early December.