World stocks rally, dol­lar up against yen

Kuwait Times - - BUSINESS -

Stock mar­kets ral­lied yes­ter­day and the US dol­lar hit a two-month high against the yen, as ro­bust eco­nomic data from the United States and Germany left in­vestors in­creas­ingly con­fi­dent about the strength of the world econ­omy. Fo­cus also turned to Fed­eral Re­serve chief Janet Yellen’s semi-an­nual tes­ti­mony on mon­e­tary pol­icy and a meet­ing of Canada’s cen­tral bank on Wed­nes­day for the lat­est sig­nals on pol­icy from ma­jor cen­tral banks.

For now, un­ease about an end to an era of ul­tra­cheap money has given way to op­ti­mism about global growth, with Fri­day’s stronger-than-ex­pected U.S. non-farm pay­rolls re­port bol­ster­ing risk ap­petite. Data on Mon­day showed ex­ports from Germany, Europe’s big­gest econ­omy, rose more than ex­pected in May.

The pan-European STOXX 600 ral­lied 0.4 per­cent, with banks and util­i­ties the strong­est sec­tors. Blue-chip stock mar­kets in Lon­don, Paris and Frank­furt climbed 0.2 to 0.5 per­cent. They fol­lowed gains in Asia, where MSCI’s broad­est in­dex of Asi­aPa­cific shares out­side Ja­pan rose 0.3 per­cent and Ja­pan’s Nikkei gained 0.8 per­cent to a one-week high, helped by weak­ness in the Ja­panese cur­rency. MSCI’s emerg­ing mar­kets bench­mark posted its best day in two weeks. US stock fu­tures were largely flat af­ter strong gains on Wall Street on Fri­day.

Crit­i­cal re­lease

“Stocks have opened higher at the start of this week, the dol­lar con­tin­ues to bask in the glory of the stronger-than- ex­pected non-farm pay­rolls data, and US bond yields are ap­proach­ing the key 2.4 per­cent level,” said Kath­leen Brooks, re­search di­rec­tor with City In­dex in Lon­don. “This week is shap­ing up to be a crit­i­cal one for data re­leases, cen­tral bank speak and earn­ings re­leases, and it could all add up to an im­por­tant di­rec­tor of as­set prices through­out the sum­mer months.”

The dol­lar rose al­most 0.4 per­cent to 114.29 yen, a two-month peak, while the dol­lar in­dex - which mea­sures the dol­lar’s value against a bas­ket of other ma­jor cur­ren­cies - was a touch firmer at 96.142. The euro was softer at $1.1388. Oil prices de­clined, ex­tend­ing losses at the end of last week on the back of high drilling ac­tiv­ity in the United States and am­ple sup­plies from OPEC and non-OPEC na­tions. Brent crude fu­tures, the in­ter­na­tional bench­mark for oil prices, were at $46.27 per bar­rel, down 50 cents, or around 1 per­cent, from their last close.

Cen­tral banks in spotlight

A gen­er­ally more hawk­ish tone from the European Cen­tral Bank, Bank of Eng­land and Bank of Canada in the past two weeks have boosted mar­ket ex­pec­ta­tions that cen­tral bank pol­icy is at a turn­ing point. The US Fed­eral Re­serve has lifted rates twice this year and is seen tight­en­ing again by the end of the year. The Bank of Ja­pan yes­ter­day of­fered its most op­ti­mistic view of the coun­try’s re­gional economies in more than a decade on solid ex­ports and pri­vate con­sump­tion, un­der­scor­ing its con­vic­tion a steady re­cov­ery is gath­er­ing mo­men­tum. But BOJ Gover­nor Haruhiko Kuroda re­it­er­ated his re­solve to main­tain ul­traloose mon­e­tary pol­icy un­til in­fla­tion is sta­bly above its 2 per­cent tar­get.

“Un­like in re­cent years, where there was very patchy growth across the world, we are see­ing a syn­chro­nized up­swing in the global econ­omy,” said Alex Dryden, global mar­ket strate­gist at JP Mor­gan As­set Man­age­ment. “So while it may not be co­or­di­nated com­mu­ni­ca­tion, I do think there’s been a change in rhetoric from cen­tral banks across the world — though the ECB is the cen­tral bank to watch in the sec­ond half of the year.”

The brighter eco­nomic out­look and ex­pec­ta­tions for tighter mon­e­tary poli­cies pushed gold prices to their low­est since mid-March at $1,204.45 an ounce. Mar­kets ex­pect the Bank of Canada to raise in­ter­est rates on Wed­nes­day. Such a move would be its first in­crease in nearly seven years. The Group of 20 meet­ing in Hamburg over the week­end did not have much im­pact on mar­kets yes­ter­day. —Reuters

TOKYO: Pedes­tri­ans are re­flected on an elec­tronic stock in­di­ca­tor on a win­dow of a se­cu­rity com­pany dis­play­ing the cur­rent rate of the Tokyo Stock Ex­change. —AFP

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