Asian Shares and Gold Retreat, Bonds Slide on ECB Taper Talk


On Wednesday, Asian shares and gold retreated and bond yields were near two week peaks as markets were anxious by a media report flagging the potential withdrawal of the European Central Bank’s bond buying program.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.3% in early trading. Japan’s Nikkei prolonged increase to 0.6%, supported by a sluggish yen.

China markets are closed for the National Day holiday.

It was reported on Tuesday that the European Central Bank (ECB) would possibly wind down its 80 billion euro ($90 billion) monthly bond purchases slowly before ending its quantitative easing program, mentioning unnamed officials at euro zone countries’ central banks.

European Central Bank media officer Michael Steen later tweeted that the central bank’s decision-making body has not talked about reducing the pace of its monthly bond buying.

ECB chief economist Peter Praet told bankers on Tuesday, rates will stay low until inflation increase to the European Central Bank target.

On Tuesday, gold decline 3.3%, gold price’s percentage fall was the biggest since September 2013. It improved some of those losses on Wednesday, increasing 0.3% to $1,272 an ounce.

On Wednesday, the yield on the benchmark 10-year U.S. Treasury notes increase to a near two week peak of 1.6920. It was last at 1.6812.

German 10 year government bonds also reached an approximately two week peak of minus 0.043% on Tuesday before closing at minus 0.091%.

On Tuesday, Richmond Fed President Jeffrey Lacker contended that borrowing costs might need to increase significantly to keep inflation under control.

Jeffrey Lacker, one of seven policymakers who recently do not have a vote, but who join in policy discussions, made clear on Tuesday he would have been in the camp gunning for increase rates.

Traders have priced in a 63%  chance of the Fed increasing rates in December, according to the CME Group’s FedWatch tool.

The greenback, which received an increase suddenly from increasing expectations for a rate hike this year, edged back on Wednesday.

The dollar index (DXY), which tracks the dollar against six major global peers, fell 0.2% to 95.987 after advancing 0.5% on Tuesday. Earlier on Tuesday, it reached its highest point in nearly two months.

The greenback was flat at 102.90 yen , after soaring 1.2% to its strongest level since Sept. 14 on Tuesday.

On Tuesday,Sterling stayed near its 31 year low hit, on worries about Britain’s exit from the EU, after British Prime Minister Theresa May stated on Tuesday the country’s separation from the European Union will not be “plain sailing”.

The British pound was last up 0.1% at $1.2742, after surrendering nearly 2% over the past two days.

On Tuesday, the euro decline as much as 0.7%, but recovered to end the day slight changed. It was last trading up 0.2% at $1.12240.

Oil defied the stronger greenback to increase, thanks to a report suggesting U.S. fuel inventories may have declined for a 5th straight week.

U.S. crude futures advanced 1.1% to $49.22, after touching a three month peak earlier in the session.

Brent crude added 1% to $51.36. It hit a four month peak on Tuesday.

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