Dollar Mixed but Holds Y120

 
Snapshot: 

        Dollar mixed, holds Y120; 10-year Treasury yield at 1.955%; U.S. stock futures weaker; Nymex crude around $56; gold at $1185.50
        -Watch for: April flash manufacturing PMI, jobless claims, new home sales, Kansas City Fed manufacturing activity index; earnings from General Motors, Caterpillar, Dow Chemical, Google, Microsoft, Amazon, Procter & Gamble, Eli Lilly
        News: Eurozone Economy Slows in April; China April HSBC Flash Manufacturing PMI Falls; China Facing Capital Outflow Pressure
        In currency markets Thursday, the euro was trading around 0.5% lower against the dollar which was boosted by strong U.S. housing data on Wednesday.
        The dollar briefly pushed above the key level of Y120 in Asia, though it backed off as investors quickly cashed in on that momentum.
        The New Zealand dollar, meanwhile, tumbled on a central bank official's comments about interest rates.
        "Investors remain cautious about dollar buying ahead of the FOMC meeting next week," said Takuya Kanda, senior researcher at Gaitame.Com Research Institute, referring to the Federal Reserve's next policy-setting meeting.
        U.S. bond yields remained under pressure in Europe, after Wednesday's core bond sell-off, but were still stuck in a 5-week range as investors waited for direction from next week's central bank policy meeting.
        The 10-year cash yield was 1.955% and the June contract traded 5/32 higher at 129-015.
        German government bonds remained pinned lower Thursday, following the first pullback from a prolonged rally.
        The German bond, or Bund, has been in ferocious demand amid the European Central Bank's bond-buying program. It has also benefited from its status as one of the world's safest assets in recent weeks, while fears have grown about the risk that Greece might fail to reach an agreement with its international creditors and default on its debt.
        Yields last week hit a record low of around 0.05% on the 10-year Bund, but on Wednesday yields climbed to a relatively lofty 0.16%. Thursday, they stand around 0.14%.
        Peter Chatwell, a senior rates strategist at Mizuho International, attributed the move to news the ECB on Wednesday had increased the amount of money Greek banks can borrow under an emergency lending program, essentially extending a lifeline to the country's lenders.
        He also said, though, that the fall in Bunds is likely to be temporary.
        "We have strong doubts as to whether core European government bonds will sustain these cheaper levels for long," he said, adding that "inflection point, where Bunds sell off significantly, is unlikely to occur in this quarter."
        On a historical basis, Bunds remain at extremely elevated levels. Yields are negative on all Bunds maturing before July 2022, according to Tradeweb. Greek bonds, in contrast, remain extremely low as a resolution to the stalemate looks unlikely soon.
        The yield on Greek 10-year bonds was at 12.6% in early trade on Thursday. On the two-year bonds it stood at 26.8%.
        Greek Prime Minister Alexis Tsipras is expected to meet with German Chancellor Angela Merkel at a summit in Brussels on Thursday, before eurozone finance ministers meet in Riga, Latvia, on Friday.
        "In the near term, there is mounting evidence that negotiations between Greece and its official creditors are to remain tense," Citigroup strategists wrote in a note.
        U.S. stocks were poised for a pullback, as futures moved a sharp leg lower ahead of a cascade of earnings reports led out by General Motors, Procter & Gamble and Caterpillar.
        Investors will also be waiting for new home-sales data, coming on the back of a stellar reading on existing-home sales out on Wednesday. A report on jobless claims is also due.
        Futures for the Dow Jones Industrial Average dropped 41 points, or 0.2%, to 17,904, while those for the S&P 500 index fell 4.20 points, or 0.2%, to 2,096. Futures for the Nasdaq 100 index gave up 7.50 points, or 0.2%, to 4,437.75, indicating the benchmark will struggle to reach a record on Thursday.
        More housing numbers are due on Thursday, with new-home sales for March on tap at 10am ET. Economists surveyed by MarketWatch expect the annual rate to drop to 504,000 after jumping to a seven-year high in February. Weekly jobless claims are due at 8.30am ET. They are forecast to show 288,000 Americans filed for unemployment benefits last week, down from 294,000 the previous week. At 9.45am ET, Markit's preliminary report on the manufacturing purchasing managers' index for April is due. Flash PMIs out of Europe released earlier on Thursday showed growth weakened at the start of the second quarter.
        Oil prices fell on renewed concerns about the Chinese economy and another weekly rise in U.S. oil stockpiles.
        Brent crude for delivery in June fell 0.4% to $62.49 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, June-dated light, sweet crude futures fell 0.3%, flirting with $56 a barrel.
        Gold's sharp decline Wednesday was "unique because it is very rare that gold prices are moved by reports in the U.S. housing market," said Phillip Futures.
        On top of that, the dollar "on the whole" weakened, as there's less fear about an early rate hike, it says. Equities gains are mild and "insufficient to justify a heavy loss in gold prices," it says. The market's not waiting for the U.S. FOMC statement on April 28.
        "Instead of a single, big move in gold prices as initially expected, what this means is that we may be witnessing the start of a long-drawn downward trend that may last weeks," said Phillip Futures. Spot gold was 0.1% lower at $1,185.50.
        European Stocks Slump
        European stocks slumped Thursday in response to figures showing that the region's economy slowed in April, coupled with lasting concerns over the future of Greece.
        Eurozone Economy Slows in April
        The eurozone's economy slowed slightly in April, but continued to grow at a faster pace than in recent years, according to surveys of purchasing managers
        China April HSBC Flash Manufacturing PMI Falls
        An initial gauge of China's factory activity showed further weakness in April, slumping to a one-year low and defying government efforts to support the economy.
        China Facing Capital Outflow Pressure
        China is facing increased pressure from capital outflows but there is no capital flight, a senior foreign exchange official said.
        China Warns North Korean Nuclear Threat Is Rising
        Pyongyang could double nuclear-weapons arsenal by next year, according to latest Beijing estimates.
        France: 5 Terror Plots Thwarted Since January
        Prime Minister Manuel Valls said five terror plots have been thwarted in France since January, including the detention of a man Sunday suspected of planning attacks on churches.
        Write to paul.larkins@wsj.com
        (END) Dow Jones Newswires

        April 23, 2015 06:25 ET (10:25 GMT)

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