Chinese economy lifts global equities
LONDON: Europe’s stock markets rose yesterday on China-driven global economic optimism, while the pound zoomed to its highest dollar level since the 2016 Brexit referendum on strengthening UK interest rate hike hopes and solid data. Frankfurt equities rallied, 1.1 percent despite a key survey which showed that German investor confidence hit its lowest level since 2012 in April as geopolitical and US trade war fears dogged Europe’s top economy.
“Equity markets in Europe are slightly higher with traders cautiously optimistic,” said CMC Markets analyst David Madden. “The concerns about geopolitical tensions in relation to Syria and Russian sanctions have faded a little.
“The broadly positive economic data out of China overnight left traders slightly more hopeful about the state of the global economy,” Madden added. Wall Street opened higher, with the Dow gaining 0.9 percent in the first minute of trading, as sentiment was also boosted by another bank, this time Goldman Sachs, reporting a rise in profits. However, many Asian markets ran out of steam as simmering trade and geopolitical tensions-in the wake of recent US-led Syria strikes-eclipsed upbeat official data showing that China’s economy grew more than expected in the first three months of 2018.
Pound races higher
The British pound rallied to $1.4377, the highest dollar level since just after Britain’s shock EU exit referendum in June 2016, buoyed by expectations of Bank of England (BoE) interest rate hikes. Sterling was handed a boost from official data which showed that average UK wage growth is outpacing inflation for the first time in a year and the unemployment rate remaining at a 43-year low. “Real wages are still on the rise and this will boost consumer spending and economic growth over the medium term,” said analyst Miles Eakers at foreign exchange trading firm Centtrip. “The Bank of England will also be mindful of the inflationary effect this could have, increasing the prospects of another interest rate hike-on top of the one widely expected in May.”
Economists expect the BoE to raise its key interest rate next month from the current level of 0.50 percent. Back in Asia, Hong Kong and China stock markets finished in the red, after fluctuating on data showing the world’s number two economy expanded in January-March at the same rate as the previous three months.
The 6.8-percent reading was slightly more than tipped in an AFP survey and came despite a brewing trade dispute with the United States, a drive to address the country’s troubling debt mountain and a war on pollution that saw factory production cut.
Dealers are keeping a close watch on events. The trade row with China remains in focus after the Wall Street Journal reported the US is considering measures over Beijing’s restrictions on tech devices. Meanwhile, China announced a timeline for lifting ownership limits on foreign automakers yesterday, meeting a longtime demand of the United States and other countries seeking better access for their companies in the world’s biggest car market.
China’s central bank also said it would lower the reserve requirement ratio (RRR) by one percentage point for most commercial banks, to free up funding to lend to small firms, an indication that support for the economy will increase.
Kuwait stocks fall Meanwhile, Boursa Kuwait concluded yesterday’s operations with the All Market Index dropping 7.18 points to the level of 4,806.4. This index share volume amounted to 84.5 million stocks, through 3,693 spot deals, valued at KD 12.18 million ($40.19 million).
The Main Market Index fell 23.77 points to 4,847.7 through stock volume amounting to 64.5 million, done through 2,310 spot transactions, with a value of KD 3.9 million ($12.8 million). Premier Market Index rose 2.4 points to 4,782.4, with a share volume standing at 20.02 million, done through 1,383 spot transactions, valued at KD 8.2 million ($27.06 million).