The Jim Bakker Show

Dollar drops on disappointing U.S. inflation data

By Karen Brettell

NEW YORK (Reuters) – The U.S. dollar weakened on Wednesday after consumer price data showed sluggish inflation, adding to concerns the Federal Reserve will be less able to execute multiple rate increases next year.

Excluding the volatile food and energy components, consumer prices ticked up 0.1 percent in November, with the annual increase in the core CPI slowing to 1.7 percent in November from 1.8 percent in October.

“The focus is on the core measure of inflation, that came in weaker than the market expected,” said Vassili Serebriakov, a foreign exchange strategist at Credit Agricole in New York.

The dollar index against a basket of six major currencies <.DXY> dropped to 93.888, down 0.23 percent on the day.

The weak data comes before a widely expected rate hike on Wednesday, when the U.S. central bank concludes its two-day meeting.

“It will probably reinforce the caution of the committee members that are concerned that the Fed is falling short of its inflation target,” Serebriakov said. “It also supports our view that the Fed will be fairly gradual next year.”

The Fed will announce its decision on rates at 1900 GMT on Wednesday followed by a statement. Chair Janet Yellen will hold a news conference at 1930 GMT.

The Fed on Wednesday may also give its strongest hint yet on how the Trump administration’s tax overhaul could affect the U.S. economy.

Investors will pay close attention to how the central bank aims to balance a stimulus-fueled economic boost with the ongoing weak inflation and tepid wage growth that has curbed some policymakers’ appetite for higher rates.

President Donald Trump’s legislative agenda may be harder to push through, however, following Tuesday’s victory by Democrat Doug Jones in the bitter fight for a U.S. Senate seat in deeply conservative Alabama.

(Additional reporting by Saikat Chatterjee in London; Editing by Nick Zieminski)

Global stocks dip on U.S. tax reform doubt; no respite in havens

By Trevor Hunnicutt

NEW YORK (Reuters) – Global stock indexes and the U.S. dollar cooled off Friday as signs that U.S. tax reform could be delayed impeded the market’s momentum.

MSCI’s global stock index <.MIWD00000PUS>, which tracks shares in 47 countries, declined 0.15 percent, slipping further from a record level. On Thursday, the global index fell 0.4 percent following 10 straight days of gains. The dollar index <.DXY>, too, fell 0.06 percent.

The MSCI world index surged more than 20 percent so far this year, and some investors believe a pullback is due.

“The pause that the market is currently in is directly related to what’s going on from a tax standpoint,” said Jim McDonald, chief investment strategist for Northern Trust Corp.

Adding insult to injury, the pullback in stocks as well as softness in high-yield “junk” bonds this week did little to support traditional safe havens.

Benchmark 10-year U.S. Treasury notes <US10YT=RR> fell 21/32 in price to yield 2.4037 percent. The 30-year bond <US30YT=RR> fell 50/32 in price to yield 2.8845 percent. [US/]

Meanwhile, German government bond yields climbed to their highest in over a week as euro zone bonds were sold across the board for a second consecutive day. The yield on Germany’s benchmark 10-year government bond <DE10YT=TWEB> hit 0.40 percent for the first time since Oct. 27.

Spot gold <XAU=> dropped 0.7 percent to $1,275.61 an ounce. Gold pays no interest, so demand for it wanes when bonds offer higher yields. [GOL/]

Citigroup Inc equity trading strategist Alex Altmann said it is rare for government bonds and equities to be hit at the same time.

“It’s a classic hallmark of momentum strategies unwinding,” he said, referring to a investment strategy that favors buying recent winners and selling losers.

“We may not get that calm ride into the end of the year.”

Coal producer Canyon Consolidated Resources became the second junk-rated company to pull a bond sale this week, on Friday, capping a bout of volatility in credit markets.

TAX OVERHAUL

U.S. Republican senators said they wanted to slash the corporate tax rate in 2019, later than the House’s proposed schedule of 2018, complicating a push for the biggest overhaul of U.S. tax law since the 1980s.

The House was set to vote on its measure next week. But the Senate’s timetable was less clear.

“I would say a compromise will be reached,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities.

“But if they indeed decide to delay the tax cut by a year, there is likely to be some disappointment.”

Wall Street retreated a bit on concern over delays in corporate tax cuts, which would hike profits, though a rise in some media and industrial stocks limited the slide. [.N]

The Dow Jones Industrial Average <.DJI> fell 39.73 points, or 0.17 percent, to 23,422.21, the S&P 500 <.SPX> lost 2.32 points, or 0.09 percent, to 2,582.3 and the Nasdaq Composite <.IXIC> added 0.89 point, or 0.01 percent, to 6,750.94.

The pan-European STOXX 600 <.STOXX> index suffered its worst week in three months, down 0.4 percent on Friday and falling for a fourth day in row. [.EU]

“There’s a feeling out there that there’s a long-awaited correction, and no one wants to be caught by surprise,” said Emmanuel Cau, global equity strategist at JPMorgan Chase & Co.

Crude was down as expectations the Organization of the Petroleum Exporting Countries and other producers will extend their production cut agreement were offset by U.S. drillers adding the most oil rigs in a week since June, indicating output will continue to grow. [O/R]

U.S. crude <CLcv1> fell 0.56 percent to $56.85 per barrel and Brent <LCOcv1> was last at $63.61, down 0.5 percent on the day.

Bitcoin <BTC=> dropped below $7,000 on Friday to trade more than $1,000 down from an all-time high hit on Wednesday, as some traders dumped it for a clone called Bitcoin Cash.

(For a graphic on ‘Major MSCI Indexes Price Performance YTD’ click http://reut.rs/2zqsj4B)

(Additional reporting by Kit Rees and Helen Reid in London and Hideuyki Sano in Tokyo; Editing by Jennifer Ablan and James Dalgleish)

Dollar weakened by worries over delay to hoped-for cut in U.S. company taxes

By Saqib Iqbal Ahmed

NEW YORK (Reuters) – The dollar slipped against a basket of currencies on Friday and was set for its biggest weekly drop in a month as investor disappointment that implementation of part of a planned big U.S. tax overhaul may be delayed until 2019 put a brake on the currency’s recent rally.

The dollar index <.DXY>, which tracks the greenback against six major currencies, was down 0.08 percent at 94.37. For the week, the index was down 0.6 percent, on pace for its worst performance since the week ending Oct. 13.

The greenback has also lost 0.5 percent against the Japanese yen this week.

U.S. Senate Republicans unveiled a tax plan on Thursday that differed from the House of Representatives’ version on several fronts, including deductions for state and local taxes, and the estate tax.

Complicating a Republican push for the tax revamp, senators said that, like the House, they wanted to slash the corporate tax rate to 20 percent from 35 percent, but in 2019 rather than right away.

“It just highlights the challenge in reconciling the two (plans),” said currency strategist Erik Nelson of Wells Fargo Securities in New York.

The House was set to vote on its measure next week after its tax-writing Ways and Means Committee approved the legislation on Thursday along party lines, with Democrats united in opposition.

The Senate’s timetable was less clear, with a formal bill yet to be drafted in that chamber, where Republicans have a much smaller majority and a narrower path to winning approval for any legislation, let alone one as contentious as a tax package.

“I think the markets are becoming concerned that this is not a serious piece of legislation and that there really is no political support necessary to pass it,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.

The dollar index gained about 3 percent from mid-September through the end of last week, boosted by hopes of tax cuts.

“This week was a bit of a reality check for currency markets,” Wells Fargo’s Nelson said.

Sterling closed the week on firmer ground, climbing around half a percent against the dollar on Friday as better-than-expected data on British industry and rising confidence in the progress of Brexit talks supported the currency.

The pound was up 0.37 percent at $1.3197.

(Reporting by Saqib Iqbal Ahmed; Editing by Lisa Von Ahn and Frances Kerry)

Dollar hits nine-day low vs yen as rally runs out of steam

By Jemima Kelly

LONDON (Reuters) – The dollar slipped to its lowest this month against the yen on Thursday, pressured by talk of possible delays to U.S. President Donald Trump’s tax reform plans as well as a risk-off mood.

The greenback had hit its highest levels in eight months against the Japanese currency at the start of the week <JPY=EBS>, boosted by strong risk appetite across markets, but has since fallen back by about 1.3 percent.

It fell as low as 113.25 yen on Thursday after a sudden fall in Japanese equities from multi-decade peaks dampened risk sentiment in Asian trade — a mood that continued into London trading hours, with European stocks also falling.

The yen is a low-yielding currency often used to fund investment in higher-yielding currencies and assets when risk sentiment is positive.

The dollar was also 0.3 percent down against a basket of major currencies <.DXY>.

The euro climbed to a six-day high of $1.1645 <EUR=>, having dropped as low as $1.1553 on Tuesday, its weakest since July 20.

“The dollar is running out of steam. There’s nothing to drive it higher,” said BMO Capital Markets currency strategist Stephen Gallo in London.

The “Trumpflation trade” — bets that Trump’s policies would boost growth and inflation, meaning a faster pace of U.S. interest rate increases — had driven the dollar to 14-year highs after his election and 10-year U.S. Treasury yields to their highest since 2014.

But they and the dollar have since fallen back.

A U.S. Senate tax-cut bill, differing from one in the House of Representatives, was expected to be unveiled on Thursday, complicating a Republican push for a tax overhaul.

Any potential delay in the implementation of tax cuts, or the possibility of proposed reforms being watered down, would tend to work against the dollar, analysts said.

“Disappointment over the tax reforms is driving the dollar lower. There is a lack of momentum behind the recent moves and the euro’s outlook remains bright as global money managers remain underweight in the single currency,” said Marc Ostwald, a strategist at ADM Investor Services International in London.

The New Zealand dollar touched a two-week high after comments from the country’s central bank on the inflation outlook were taken as hawkish as it kept interest rates unchanged as expected.

The currency rose as high as $0.6977, its strongest since Oct. 24, before dipping to trade flat on the day at $0.6969.

(Reporting by Jemima Kelly; Additional reporting by Saikat Chatterjee in London and Masayuki Kitano in Singapore; Editing by John Stonestreet and David Goodman)

Dollar slips on fears over U.S. tax reform troubles

By Jemima Kelly and Polina Ivanova

LONDON (Reuters) – The dollar slipped to a one-week low against the yen on Wednesday, weighed down by worries over possible delays to Donald Trump’s tax reform plans, evidence of the U.S. president’s waning popularity as well as lower Treasury yields.

The Washington Post, citing unidentified sources, reported on Tuesday that Senate Republican leaders are considering a one-year delay in the implementation of a major corporate tax cut to comply with Senate rules.

Any potential delay in the implementation of tax cuts, or the possibility of proposed reforms being watered down, would tend to work against the U.S. currency, analysts said.

The so-called “Trumpflation trade” – bets that Trump’s policies would boost growth and inflation, meaning a faster pace of interest rate hikes from the U.S. Federal Reserve – had driven the dollar to 14-year highs in the aftermath of his election, and 10-year U.S. Treasury yields to their highest since 2014 at more than 2.6 percent <US10YT=RR>.

They, and the dollar, have since fallen back.

There had been some talk of a revival of the Trumpflation trade, with the greenback rising to a 3-1/2-month high against a basket of currencies <.DXY> last month after the U.S. Senate approved a budget blueprint for tax reform.

But the latest report fed doubts over whether Trump could indeed push that program through.

“Fed rate expectations and the news flow regarding..tax reforms are two key elements in terms of the dollar’s performance,” said Jeremy Stretch, head of G10 foreign exchange strategy at CIBC Capital Markets in London.

“We have seen rate support for the dollar in terms of U.S. yields diminishing…so I think that’s certainly limiting dollar gains and keeping the dollar index away from … recent highs,” he added.

The dollar was last down 0.4 percent at 113.52 yen <JPY=>, its weakest so far this month, falling from an eight-month high of 114.735 touched on Monday.

It was also down 0.1 percent against its basket at 94.870 and down 0.1 percent against the euro, which was trading at $1.1591 <EUR=>.

“If the story is true that they’re considering a delay of one year to the corporate tax cut,…big differences (among members of Congress) will need to be sorted, so we continue to be dubious on that proceeding,” said MUFG’s European head of global markets research in London, Derek Halpenny.

Halpenny added that a Wall Street Journal poll on Tuesday showing Trump’s approval rating falling sharply, even in counties that had voted for him, was adding to a picture of an increasingly unpopular president, which could potentially embolden members of Congress to oppose his plans and further weaken the dollar.

(Reporting by Jemima Kelly and Polina Ivanova in London; Additional reporting by Shinichi Saoshiro in Tokyo; Editing by Emelia Sithole-Matarise)

Dollar set for best week of 2017, stocks near records

FILE PHOTO: U.S. dollar notes are seen in this November 7, 2016 picture illustration. REUTERS/Dado Ruvic/Illustration/File Photo

By Lewis Krauskopf

NEW YORK (Reuters) – The dollar was headed for its strongest week of the year on Friday, while world stock markets climbed back near record-high levels on the last trading day of the quarter.

Firming expectations for another U.S. interest rate increase by year-end, combined with U.S. President Donald Trump’s tax-cut plan, have dominated markets for most of the week.

Data on Friday showed U.S. consumer spending barely rose in August but the report did little to change expectations that the Federal Reserve would raise interest rates again in December. Another report showed the Chicago purchasing management index, which gauges factory activity, came in better-than-expected for September.

“The economic data we got was either on target or it was slightly better than expected so there wasn’t anything negative at all to put a pause on things,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

“Generally, the overall economic backdrop is very solid. In a bull market when you don’t have bad news you tend to get up moves in the market,” Frederick said.

The Dow Jones Industrial Average <.DJI> fell 18.29 points, or 0.08 percent, to 22,362.91, the S&P 500 <.SPX> gained 4.93 points, or 0.20 percent, to 2,514.99 and the Nasdaq Composite <.IXIC> added 31.99 points, or 0.5 percent, to 6,485.44.

The S&P technology sector <.SPLRCT> led the way, rising 0.6 percent.

The S&P 500 had set a record closing high on Thursday.

The pan-European FTSEurofirst 300 index <.FTEU3> rose 0.34 percent and MSCI’s gauge of stocks across the globe <.MIWD00000PUS> gained 0.34 percent.

The MSCI global index was within 0.5 percent of an all-time high and on pace for its 11th consecutive positive month.

The dollar index <.DXY> was flat. The greenback was up about 1 percent for the week, on track for its best week since December.

“What you have seen is a general closing out of some short dollar positions but for that to be sustained we need greater detail on Trump’s fiscal plans and see it going through,” said James Binny, head of currency portfolio management for EMEA at State Street Global Advisors.

The euro <EUR=> was up 0.29 percent to $1.1818.

Benchmark 10-year notes <US10YT=RR> last fell 4/32 in price to yield 2.3193 percent, from 2.307 percent late on Thursday.

U.S. crude <CLcv1> fell 0.23 percent to $51.44 per barrel and Brent <LCOcv1> was last at $56.88, down 0.49 percent on the day.

Spot gold <XAU=> dropped 0.2 percent to $1,284.52 an ounce.

(Additional reporting by Abhinav Ramnarayan and Saikat Chatterjee in London; Editing by Andrew Bolton and Nick Zieminski)

Dollar hits low note while euro shines; storms stoke worry in U.S.

By Hilary Russ

NEW YORK (Reuters) – Reduced expectations for another U.S. Federal Reserve interest rate hike this year helped drive down the dollar to its lowest in more than 2-1/2 years on Friday and kept gold near a one-year high.

The euro hit multi-year peaks in the wake of a European Central Bank meeting, while U.S. crude oil prices tanked more than 3 percent as powerful Hurricane Irma roared toward Florida.

Stubbornly weak inflation continues to surprise Fed policymakers. In a speech on Thursday, New York Fed President William Dudley did not repeat an assertion from three weeks ago that he expects to raise rates once more this year.

Also dampening the dollar and lowering the chances of another rate hike was an agreement in Congress to push U.S. debt ceiling talks three months down the road to December, coinciding with the Fed’s policy meeting.

Against a basket of other major currencies, the dollar index <.DXY> was down 0.38 percent after touching a low of 91.011, its weakest since January 2015.

The safe-haven Japanese yen <JPY=> also strengthened 0.61 percent versus the greenback at 107.80 per dollar, and the euro <EUR=> rose 0.12 percent to $1.2036.

The euro’s rally built on ECB President Mario Draghi’s suggestion that it may begin tapering its massive stimulus program this fall.

Draghi referred several times Thursday to the euro’s strength and said it was the main reason for a cut in the bank’s 2018-19 inflation forecasts. He also indicated any winding down of its massive stimulus program was likely to be slow.

Those comments did little to deter euro bulls, however, and a Reuters report that central bank officials were in broad agreement that their next step would be to reduce their bond purchases also supported the currency.

The ECB “left the mystery out there” with regard to tapering, said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York. “It creates a feeding frenzy, and the momentum that was there (in the euro) gets accelerated.”

Oil prices fell sharply on worries that energy demand would be hit by Irma, one of the most powerful storms to near the United States in a century, as it barreled toward Florida and the U.S. Southeast.

Irma is the second major storm to threaten the United States in two weeks after Hurricane Harvey shut a quarter of U.S. refining capacity and 8 percent of U.S. oil production.

“Hurricanes can have a lasting effect on refinery and industry demand,” said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt.

U.S. crude <CLcv1> fell 3.12 percent to $47.56 per barrel and Brent <LCOcv1> was last at $53.76, down 1.34 percent.

Economists have said Harvey could weigh on U.S. economic growth in the third quarter.

Spot gold <XAU=> was down 0.2 percent to $1,346.52 an ounceafter hitting $1,357.54, its highest since August 2016. It was up 1.7 percent this week, notching a third consecutive weekly gain.

U.S. shares were mixed, with the S&P ending slightly lower as investors braced for Irma and fretted that Pyongyang could launch another missile test on Saturday, North Korea’s founding day, keeping risk appetite in check going into the weekend.

The Dow Jones Industrial Average <.DJI> rose 13.01 points, or 0.06 percent, to end at 21,797.79, the S&P 500 <.SPX> lost 3.67 points, or 0.15 percent, to 2,461.43 and the Nasdaq Composite <.IXIC> dropped 37.68 points, or 0.59 percent, to 6,360.19.

Stocks elsewhere were slightly higher.

The pan-European FTSEurofirst 300 index <.FTEU3> rose 0.17 percent and MSCI’s gauge of stocks across the globe <.MIWD00000PUS> edged up 0.01 percent.

The U.S. 10-year Treasury yield fell to a 10-month low of 2.016 percent but then rose, with the benchmark notes last up 2/32 in price to yield 2.0559 percent.

(Additional reporting by Sam Forgione, Gertrude Chavez-Dreyfuss, Julia Simon and Lewis Krauskopf and Caroline Valetkevitch in New York; Editing by Nick Zieminski and James Dalgleish)

Dollar edges lower versus yen before Yellen testimony; sterling off lows

A U.S. five dollar note is seen in this picture illustration June 2, 2017. REUTERS/Thomas White/Illustration

By Saikat Chatterjee

LONDON (Reuters) – The U.S. dollar fell against the yen and languished at 14-month lows against the euro on Wednesday ahead of Federal Reserve Chair Janet Yellen’s appearance in Congress to give testimony on monetary policy.

As investors sought to take profits after a recent dollar rally on the back of a broadly mixed session for risky assets, the greenback’s rise was also halted thanks to a softening of U.S. Treasury yields this week.

The dollar edged 0.4 percent lower against the yen to 113.43 <JPY=EBS> in early trades after rising more than 5 percent over the last month. It was trading at 1.14565 against the euro, its lowest level since early May. <EUR=EBS>

“The Yellen testimony remains the key event risk in today’s session but we remain optimistic about the dollar’s outlook and putting on a long position against sterling is the best way to execute that view,” said Adam Cole, head of FX strategy at RBC Capital Markets in London.

Yellen will give her semi-annual monetary policy testimony before Congress later on Wednesday and on Thursday, and investors will be parsing it for clues on when the Fed will start reducing its massive balance sheet.

Strategists at Brown Brothers Harriman don’t expect Yellen to break new ground in her testimony.

The Fed raised rates last month to a range of 1 percent to 1.25 percent and market expectations are roughly of a 50 percent probability that interest rates will rise again before the end of the year, according to the CME’s Fed watch data.

UK PROSPECTS

While there is a 50 percent probability for the Bank of England to raise interest rates too before the end of the year, markets are expecting the central bank to strike a dovish stance after recent soft data and comments from policymakers.

In an interview for a Scottish newspaper, the Press and Journal, published on Wednesday, Bank of England Deputy Governor Ben Broadbent said that while there was reason to see the bank moving towards higher rates, there were “a lot of imponderables”.

His comments pushed sterling to a two-week low against the dollar <GBD=D3> and to its lowest in eight months against the euro in early trading on Wednesday.

While subsequent wages data pulled sterling from the day’s lows, the outlook remained wary.

In other currencies, the Canadian dollar <CAD=> was slightly higher against its U.S. counterpart as investors awaited a Bank of Canada interest rate decision later on Wednesday.

(Editing by Gareth Jones)

Slow U.S. jobs growth takes shine off dollar, stocks hold all-time highs

A U.S. five dollar note is seen in this illustration photo June 1, 2017. REUTERS/Thomas White/Illustration

By Vikram Subhedar

LONDON (Reuters) – The dollar retreated slightly after disappointing U.S. jobs growth data on Friday though world stocks clung on to record highs, having gained 11 percent so far this year.

Nonfarm payrolls increased 138,000 last month as the manufacturing, government and retail sectors lost jobs, the Labor Department said on Friday.

While the job gains could still be sufficient for the Federal Reserve to raise interest rates this month, the modest increase could raise concerns about the economy’s health after growth slowed in the first quarter.

“This number is not the kind of report that derails the Fed from raising rates in June,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York.

“We’re in a mature phase of the cycle, job growth is going to slow down. The Fed has been talking about this for over a year at this point and they are braced for that reality.”

The dollar index <.DXY>, which measures the greenback’s strength against a basket of major currencies, fell 0.3 percent.

Stock futures on Wall Street trimmed gains slightly and were last trading little changed.

Overnight, data showing a healthy uptick in private sector hiring and factory activity during May bolstered expectations that the U.S. economy was picking up speed and lifted U.S. stocks after two days of losses.

Those gains filtered through to global stocks, lifting the MSCI All-Country World index <.MIWD00000PUS> 0.4 percent to a record high and on track to post a seventh straight week of gains, the longest such run since 2010.

Stocks in Europe joined the party with German bluechips powering ahead to a record, up 1.6 percent. The UK’s FTSE 100 <.FTSE> also hovered near its highest-ever levels rose 0.4 percent.

So far this year investors have pumped $140 billion globally into stock funds, according to fund flow data from Bank of America Merrill Lynch and EPFR showed on Friday.

Global equities attracted $13.7 billion in the latest week to Wednesday, the largest inflows in five weeks, as investors loaded up on risk.

In commodities, however, oil prices resumed their slide with key futures contracts down more than 2 percent amid worries that U.S. President Donald Trump’s decision to abandon a global climate pact could spark more crude drilling in the United States, stoking a persistent glut in global supply.

Global benchmark Brent crude futures <LCOc1> fell to $49.63 a barrel, while U.S. West Texas Intermediate crude <CLc1> by more than a dollar to $47.36 per barrel.

(Reporting by Vikram Subhedar; Editing by Hugh Lawson and Keith Weir)

World stocks retreat from record highs as valuations give cause for a pause

FILE PHOTO: Visitors looks at an electronic board showing the Japan's Nikkei average at the Tokyo Stock Exchange (TSE) in Tokyo, Japan, February 9, 2016. REUTERS/Issei Kato/Files

By Vikram Subhedar

LONDON (Reuters) – Global stocks paused near record highs as worries over China’s banking system provided an excuse for investors to lock in some profits. The dollar was set for its best week of the year on bets the Federal Reserve will raise U.S. interest rates in June.

A dip on Wall Street overnight on signs of weak consumer spending and waning enthusiasm over the recovery in European corporate earnings has put MSCI’s gauge of world stock markets <.MIWD00000PUS> on track for its first weekly loss in four.

The index trades at now trades at more than 16 times forward earnings, according to Thomson Reuters data, and above its long-term average of 15.6 times.

U.S. stock futures <ESc1> were down another 0.2 percent on Friday.

“We’ve had a nervous twitch about China, over this week,” said Sean Darby, chief global equity strategist at Jefferies. “We’ve had a bit more of a regulatory overhang coming through in the financial system.”

China’s banking regulator this week launched emergency risk assessments of lenders’ new business practices, sources told Reuters, as Beijing extends its crackdown on shadow banking.

With corporate earnings seasons in the U.S. and Europe drawing to a close investors, focus is likely to shift back to central banks, particularly in the United States, where inflation pressures are growing.

U.S. data on Thursday showed producer prices rebounded more than expected last month, leading to the biggest annual gain in five years.

Combined with a tightening labor market, firming inflation backs market expectations that the Federal Reserve will raise interest rates at its meeting next month. The central bank has forecast two more increases this year after raising rates a quarter of a point in March.

The stronger fundamentals in the U.S. helped offset uneasiness over political turmoil after President Donald Trump abruptly fired FBI chief James Comey.

The dollar index, which tracks the currency against a basket of six major rivals, was flat on the day at 99.622 <.DXY>, but was up 1 percent for the week.

Sterling was steady on the day at $1.2886 <GBP=> after dropping to a one-week low on Thursday following the Bank of England’s decision to keep interest rates unchanged. Policymakers indicated that rates were unlikely to rise until late 2019.

EUROPE’S SWEET SPOT

In Europe, stock markets steadied this week. Company profits are expected to grow 20 percent in the first quarter, the best corporate results in a decade, according to Morgan Stanley.

Their outperformance this year against global peers remains intact, with the benchmark’s <.STOXX> 10 percent gains outpacing the 7 percent rise on the S&P 500 <.SPX>.

Greek stocks <.ATG> snapped a their longest winning streak in two decades.

“European stocks are still in the sweet spot of basking in the removal of political risk in Europe for the time being, though it is somewhat ironic that we could see a modest decline on the week as investors take stock,” said Michael Hewson, chief markets analyst at CMC Markets.

European equity funds pulled in a record $6.1 billion in inflows in the week to May 10, according to data from EPFR, with centrist Emmanuel Macron’s win in the French presidential election seen as a trigger.

Concerns over valuations are beginning to emerge. Credit Suisse strategists cut their rating on Spain, the euro zone’s top performing market for the year, to “underperform,” saying the strong earnings and economic momentum was moderating.

At the same time, the collapse in volatility across asset classes to multi-year or record lows, is tempting more investors into making bets that markets will remain calm given the brighter outlook for global growth.

Bank of America Merrill Lynch said its high-net-worth clients cut cash and resumed buying low-volatility exchange-traded funds.

Yields for the euro zone’s weaker borrowers, such as Italy, Portugal and Spain, were all also 1 to 3 basis points lower as investors awaited announcements of the volumes for expected bond sales next week by France and Spain.

Oil prices held recent gains as traders expected OPEC-led production cuts to extend beyond the middle of this year and as U.S. crude inventories fell to their lowest levels since February.

International Brent crude futures <LCOc1> were at $50.78 per barrel. U.S. West Texas Intermediate crude futures <CLc1> were at $47.85 per barrel, both little changed on the day.

(Reporting by Vikram Subhedar, editing by Larry King)

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