Euro hits fresh low before inflation trial, bonds boom:
The euro hit a nine-year trough on Wednesday as collapsing oil prices and worries about the world economy drove skittish investors into the arms of safe-haven sovereign debt.
From Japan to Germany to Australia, government borrowing costs reached all-time lows as oil fell 10 percent in just two days and investors wrestled with the risk of global deflation. Asian share markets did try to steady after recent steep falls and U.S. stock futures were a shade firmer, but the gains were hostage to euro zone inflation data due later Wednesday.
The figures are expected to show the first annual fall in consumer prices since 2009, piling pressure on the European Central Bank to launch all-out quantitative easing at its next policy meeting on Jan 22. We expect the ECB to announce a sovereign QE programme on 22 January, and the first purchases to probably start in the following week.
Investors were busy selling the euro in anticipation of more money-printing by the central bank, pushing the single currency to a fresh low of $1.1842 in Asian trade before steadying at $1.1877. Equity markets were finding some support in Asia after a run of torrid sessions. Japan’s Nikkei edged up 0.4 percent after suffering the largest one-day drop in 10 months the previous days.
On Wall Street, the three major stock indexes had fallen for a fifth straight session on Tuesday, marking the longest losing streak since late 2013 for the S&P 500. The Dow shed 0.75 percent, the S&P 500 0.9 percent and the Nasdaq 1.29 percent.
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