Interest rate decisions focus global investor minds
Interest rates dominated market sentiment on Thursday with decisions due from the Europe Central Bank and Bank of England, putting stocks, bonds and currencies on edge.
European stocks fell, as did bond prices. The euro rose against both the dollar and yen ahead of the ECB meeting, where officials are expected to keep rates on hold at 4.0 percent.
Britain's pound bumped along near 26-year highs above $2. The BoE is expected to raise rates 25 basis points to a six-year high of 5.75 percent
The ... more sensitive issue will be what (ECB President Jean-Claude) Trichet says about rates in his question-and-answer session following the rate decision for the euro zone, said Marc Ostwald, a bond strategist at Insinger de Beaufort in London.
Expectations are strong that the bank will hike in September.
Interest rates always grab investor attention, but they are more in focus than usual at the moment with financial markets worried about whether the rising cost of borrowing will drain liquidity and undermine the foundations of recent asset rises.
European stocks were slightly lower. The FTSEurofirst 300 (.FTEU3: Quote, Profile, Research) lost 0.4 percent.
More broadly, however, global equities were at all time highs (.MIWD00000PUS: Quote, Profile, Research).
Earlier, Japan's Nikkei average (.N225: Quote, Profile, Research) edged up 0.3 percent, rising for a sixth session, as investors picked up shares in exporters boosted by a weaker yen.
The benchmark rose 52.76 points to 18,221.48. The broader TOPIX index (.TOPX: Quote, Profile, Research) gained 0.3 percent to 1,788.16.
CURRENCIES, BONDS
The euro hit a record high versus the low-yielding yen, boosted by expectations the European Central Bank will pave the way for a September interest rate rise later in the session.
Sterling stayed near the previous day's 26-year peaks versus the dollar. It was at $2.0165.
The euro set an all-time high of 167.30 yen, according to Reuters data. It was also up a quarter of a percent against the dollar at $1.3647.
Euro zone government bonds fell ahead of the rate decisions, extending losses from Wednesday as firmer stock markets pulled funds from the safe haven of fixed income.
The interest rate-sensitive two-year Schatz yield
The 10-year Bund yield was up 1.6 basis points at 4.624.
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