EU stocks climb on coat-tails of Wall Street
LONDON: European stock markets rose yesterday, gaining traction from a particularly strong rebound on Wall Street and in Tokyo. London equities also advanced as the pound dipped after Bank of England governor Mark Carney poured cold water on raising interest rates any time soon. Barclays shares fell only 0.3 percent after Britain’s Serious Fraud Office said it had charged the UK banking group and a former chief executive with fraud linked to funding from Qatar.
European bourses had enjoyed gains on Monday and US equities ended at records as traders also cheered a strong victory for French President Emmanuel Macron’s centrist party in parliamentary elections. “Markets in the UK and Europe have totted up a few more gains this morning, after an impressive session yesterday,” said IG analyst Chris Beauchamp. Frankfurt’s DAX set a new record in morning trading.
“The size and breadth of yesterday’s bounce, which took hold across European, UK and US indices, suggests that we are in the midst of another sustained move higher,” added Beauchamp. Wall Street was back in rally mode on Monday, with the Dow and S&P 500 finishing at records as Apple, Facebook and other tech shares posted strong gains.
Large tech shares reversed a spate of weakness and some ugly losses over the last two weeks to push sharply higher. The technology sector sent Tokyo stocks spiking higher yesterday, buoyed also as the dollar extended gains against the yen on fresh indications the Federal Reserve will lift interest rates again this year.
However, most other regional Asian markets struggled after Monday’s healthy gains. One of the key drivers of Monday’s US rally were comments from influential New York Federal Reserve Bank president William Dudley, who reaffirmed the bank’s plan to press on with its rate hikes and forecast of higher inflation. He said that despite tepid price rises, he was confident that “if the labour market continues to tighten, wages will gradually pick up”.
“Hitting the right chords and sounding dismissive about the recent slowdown in inflation, an unrepentantly hawkish Dudley provided the USD bulls with enough fodder,” said Stephen Innes, senior trader at trading firm Oanda. The remarks came after Fed boss Janet Yellen sounded a more hawkish tone than usual, while the central bank set out plans to wind down its asset holdings to suck cash out of the financial system.
Most Asia markets struggle
Meanwhile, Tokyo’s Nikkei rallied yesterday as the dollar extended gains against the yen on fresh indications the Federal Reserve will lift interest rates again this year, while technology firms tracked a sector rebound on Wall Street. However, most other regional markets struggled after Monday’s healthy gains, despite being given a positive lead from Wall Street where the Dow and S&P 500 closed at fresh record highs.
One of the key drivers of Monday’s US rally were comments from influential New York Federal Reserve Bank President William Dudley, who reaffirmed the bank’s plan to press on with its rate hikes and forecast of higher inflation. He said that despite tepid price rises, he was confident that “if the labor market continues to tighten, wages will gradually pick up”. “Hitting the right chords and sounding dismissive about the recent slowdown in inflation, an unrepentantly hawkish Dudley provided the USD bulls with enough fodder,” Stephen Innes, senior trader at OANDA, said in a note. The remarks came after Fed boss Janet Yellen set out a more hawkish tone than usual, while the central bank set out plans to wind down its asset holdings to suck cash out of the financial system.
The greenback jumped in US trade and kicked on in Asia, heading towards 112 yen for the first time since the end of May. Tokyo stocks ended the morning session 1.1 percent higher, with exporters key winners thanks to the weaker yen, while tech firms bounced after two weeks of sharp losses. Other major markets struggled. Hong Kong was slightly lower, Sydney fell 0.4 percent and Seoul gave up 0.1 percent. Singapore shed 0.2 percent.
Shanghai also slipped 0.2 percent as investors await a decision by MSCI on whether to include it in its list of benchmark indexes. The bourse has been denied for the previous three years over concerns about certain restrictions, despite Beijing providing greater access to its domestic, renminbi-based capital markets.
MSCI said China still maintains problematic restrictions including a 20 percent monthly repatriation limit, which it called “a significant hurdle for investors,” and too many restrictions on new financial product offerings.