Morning Moneybeat Europe: ECB Expected to Hold Line Again -- WSJ Blog

        By David Cottle
        Good Morning Europe
        European stocks are called modestly higher after a positive Wall Street close. Hopes that Russia is now in a more conciliatory frame of mind over Ukraine are also supportive, but for the moment they remain mere hopes and the situation there remains volatile.
        Assuming it doesn't worsen, the European Central Bank's policy conclave will take center stage. It isn't expected to make any monetary moves, despite calls for further easing from some quarters. Borrowing costs for the euro zone's periphery have fallen to pre-crisis levels and the latest data keep recovery hopes very much alive, so Mario Draghi and Co. may feel justified in holding the line. It will be interesting to see how concerned the ECB chief sounds about euro strength when he meets the press.
        The Bank of England is also expected to indulge in yet another month's gentlemanly inaction, despite ever shriller commentary about the U.K.'s frothy housing market.
        Overnight, Fed Chair Janet Yellen's testimony amounted to little more than 'steady as she goes' for monetary policy in the U.S., while Chinese trade data provided a rare upside surprise, at least in terms of exports.
        By David Cottle
        Market Snapshot: U.S. stocks (Wednesday close): DJIA up 0.7%, Nasdaq down 0.3%, S&P 500 up 0.6%. Nikkei now up 1.1%. June FTSE and S&P both flat. Brent crude down 16 cents at $107.97. Gold up $1.10 at $1290. EUR/USD now at $1.3915, just above $1.3911 late Wednesday in New York. USD/JPY at Yen101.82, below Yen101.91. Ten-year T-note yields 2.61%, Bund 1.47% and Gilt 2.66%.
        Watch For: Monetary policy decisions from the European Central Bank and Bank of England, U.S. initial jobless claims.
        What you may have missed from MoneyBeat:
        Euronext to IPO Across Three of its Markets : Euronext, the stock exchange operator set to be spun off by IntercontinentalExchange, plans to go ahead with an initial public offering next month, listing initially across three of its own exchanges.
        Short Sellers Pounce on Twitter's Drop: Short sellers are pouncing on Twitter Inc.'s big drop, taking a bearish view that the stock's recent tumble is far from over.
        Economics Make Mr Putin Blink: Russia's President Vladimir Putin turned conciliatory on Wednesday, saying he was open to discussions about achieving a peaceful resolution to the Ukraine crisis. Naturally, he also called for Ukraine to stop military operations in its eastern Russian-speaking regions. But there might well be more than just political gamesmanship behind Mr Putin's latest move. He'll undoubtedly be feeling the economic pressure.
        Worrying Signals From German Industry: Germany's latest industrial production data released Wednesday morning were surprisingly bad. There's some mitigation in the fact that the figures tend to be lumpy, so later months could see a recovery. But there are also reasons to be worried that it speaks of deeper global weakness. German manufacturing orders fell 2.8% on the month in March against expectations of a 0.2% rise. February's orders were revised to a rise of 0.9% from an initially reported 0.6% gain.
        Spain's Yields Hit Record Lows, But It's Nothing to Celebrate: Looking at Spanish bond yields, it's tempting to believe all those crisis-era complaints about the European Monetary System's design flaws were unjustified. But the European Central Bank, which meets Thursday, cannot declare victory.
        Are African Issuers About to Get the Show on the Road?: Nigeria's Diamond Bank Plc will start meeting with global bond investors Wednesday as it attempts to sell its first ever dollar bond after shelving plans twice before. It could kick-start a mini-wave of international bond deals from the continent.
        The Dollar-Drop Headscratcher: Sterling has swept higher, close to $1.70, in fact. The euro is on the up. The yen has been too. The New Zealand dollar has cranked higher to the point where its central bank governor is talking about the possibility of intervention. The glue here is the queasy US dollar. But why is the buck under pressure? This was supposed to be the dollar's big year.
        What Explains the Anglo-German Yield Gap?: British bonds have been steadily losing ground against their German counterparts since September 2012, not long after European Central Bank President Mario Draghi promised to do whatever it took to preserve the single currency. Unsurprisingly, those words ignited a massive rally in the sovereign debt of the euro zone's most bombed out economies. But is that enough to justify the yawning chasm in yields between U.K. and German government debt?
        ECB Preview: May is Too Early for Action: Prepare to eat your breakfast/lunch/dinner at your desk (depending where you are) Thursday, because it's European Central Bank day. Few expect action, as such, despite persistently drab inflation. Core policy, announced at 11:45 a.m. GMT, is expected to be unchanged. But President Mario Draghi's press conference is always a must-watch. Here's what to expect.
        This is What Low Volatility Has Done to Macro Hedge Funds : The financial markets have fallen into a slumber. The euro has never been so steady against the dollar. Big trends such as the rise in Japanese stocks and the slide in the yen have stalled. U.S. government bonds are flat-lining. It points to drab returns for macro hedge funds that tend to do better when price movements are more volatile.
        Siemens Cuts to the Chase: Siemens has at last cut to the chase. Long criticized as cautiously-run, rumble-tumble of engineering businesses, some good, others less good, Germany's flagship engineering company is making a good stab at focusing on the essentials of its admittedly still diverse portfolio. Siemens has defined its key businesses as "electrification, automation, and digitilization" in a presentation to investors Wednesday.
        City Minister Myners Damns Co-op's 'Near Ruinous' Failure of Governance: The Co-operative Group faces a radical overhaul if it is to recover from the "traumatic shocks" of the last year and "reverse a decline that started over fifty years ago", according to the former City minister charged with reforming the U.K.'s largest mutual.
        From The Wall Street Journal:
        European Business Hit By Russian Slowdown : A swath of companies, from banks to brewers, are taking big hits to their bottom lines caused by the political uncertainty surrounding Moscow's standoff with the West over Ukraine and the dwindling Russian economy.
        Yellen Sees Indicators Pointing to Rebound in Spending, Production: Federal Reserve Chairwoman Janet Yellen offered a mostly upbeat assessment of the economic outlook in testimony to Congress on Wednesday but signaled that her optimism hasn't altered the central bank's plan to keep short-term interest rates near zero for the foreseeable future.
        Hunt for Gadhafi-Era Assets Leads to London : Libyan investigators pursuing former officials' wealth believe the family of Ali Dabaiba, who ran a state agency under Gadhafi, put some of its money into the high-end London real-estate firm Chesterton Humberts.
        (END) Dow Jones Newswires

        May 08, 2014 01:44 ET (05:44 GMT)