Euro­pean stocks bounce back from worst week in six

The Pak Banker - - INTERNATIONAL BUSINESS/SPORTS -

Euro­pean stocks re­bounded from last week s heavy sell­off on Mon­day and the dol­lar rose broadly, with in­vestors re­as­sured by sta­bil­ity in China s yuan ex­change rate af­ter it was fixed slightly higher for the sec­ond day run­ning.

Asian mar­kets were more volatile, how­ever, and emerg­ing mar­ket cur­ren­cies and oil prices were an­chored near his­toric lows.

The FTSEuroFirst 300 in­dex of lead­ing shares was up 0.8 per­cent at 1,540 points . FTEU3, claw­ing back some of last week s 3 per­cent de­cline - its big­gest loss in six weeks. Wall Street was ex­pected to open higher SPc1.

Ger­many s DAX was up 0.6 per­cent .GDAXI and France s CAC 40 up 0.7 per­cent .FCHI. Bri­tain s re­source and com­mod­ity- heavy FTSE 100 . FTSE, how­ever, was 0.2 per­cent lower. "Euro­pean eq­ui­ties, based off re­sults thus far, are show­ing slightly stronger earn­ings than Q1, with fi­nan­cials lead­ing earn­ings growth," said Brenda Kelly, head an­a­lyst at Lon­don Cap­i­tal Group.

Al­stom shares rose as much as 7 per­cent af­ter two peo­ple fa­mil­iar with the mat­ter told Reuters Gen­eral Elec­tric (GE.N) was ex­pected to se­cure Euro­pean Union ap­proval for a pro­posed 12.4 bil­lion euro bid for its power busi­ness. Shares in Hennes & Mau­ritz (HMb.ST) ad­vanced 2.4 per­cent af­ter the fash­ion re­tailer re­ported higher sales.

Ear­lier in Asia, MSCI s broad­est in­dex of Asia- Pa­cific shares out­side Ja­pan .MIAPJ0000PUS fell 0.8 per­cent, adding to last week s loss of 2.6 per­cent suf­fered af­ter Bei­jing s de­val­u­a­tion of the yuan buf­feted global fi­nan­cial mar­kets and fanned con­cerns about China s econ­omy.

The yuan fell more than 4 per­cent at one point last week, pulling down riskier as­sets in­clud­ing emerg­ing cur­ren­cies glob­ally amid fears the de­val­u­a­tion would spark a global cur­rency war. But China slowed the pace of the cur­rency s drop, and on Mon­day fixed it higher for the sec­ond day in a row.

Emerg­ing cur­ren­cies con­tin­ued to strug­gle. The rou­ble hit a six-month low RUB=, Malaysia s ring­git held near a 17-year low MYR= and Tur­key s lira fell to its weak­est on record. With the big fo­cus whether the Fed raises in­ter­est rates as early as next month, the dol­lar was the ma­jor win­ner in cur­rency mar­kets.

"With re­duced volatil­ity, fears on passthrough from the China de­val­u­a­tion to Fed pol­icy should sub­side and this may see fo­cus shift back to the sit­u­a­tion in the United States," wrote Todd Elmer, head of Citi s G10 strat­egy in Sin­ga­pore. The euro fell a third of one per­cent to $1.1072.

Euro in­vestors also weighed up the grow­ing like­li­hood that the Greek gov­ern­ment will call a con­fi­dence vote fol­low­ing a re­bel­lion among law­mak­ers from the rul­ing Syriza party over the coun­try s new 86 bil­lion euro bailout deal. The dol­lar gained 0.2 per­cent against the yen JPY= af­ter Ja­pan s econ­omy shrank in the sec­ond quar­ter.

The 0.4 per­cent con­trac­tion wasn t as large as the 0.5 per­cent fall ex­pected, but con­cerns that the third quar­ter may see only mild im­prove­ment are rekin­dling ex­pec­ta­tions of fur­ther mon­e­tary eas­ing by the Bank of Ja­pan.

In bond mar­kets, the bench­mark 10year U.S. Trea­sury yield slipped two ba­sis points to 2.18 per­cent. Crude oil, another mar­ket churned last week by China s shock cur­rency move and its po­ten­tial im­pact on de­mand for com­modi­ties, con­tin­ued to strug­gle in the wake of global over­sup­ply con­cerns.

US crude CLc1 was down 1.8 per­cent at $41.73 a bar­rel, within reach of a six- year trough of $ 41.35 struck on Fri­day.

Tokyo stocks edged up af­ter data showed Ja­pan's eco­nomic con­trac­tion was less se­vere than ex­pected, while volatil­ity sub­sided across ma­jor mar­kets as the Chi­nese yuan sta­bilised af­ter last week's sur­prise de­val­u­a­tion.

Ja­pan's Nikkei share av­er­age gained 0.5 per­cent to 20,620.26 while the broader Topix rose 0.5 per­cent to close at 1,672.87, with turnover sink­ing to its low­est level since early April with many mar­ket play­ers away for Ja­pan's "obon" hol­i­days.

Con­cerns over a slow­down in China kept most in­vestors away from global cycli­cal shares in favour of those linked to do­mes­tic de­mand.

Hong Kong's key share in­dex fell to a more than one-month low on Mon­day, ig­nor­ing a firmer close in Chi­nese stocks, as fears of fur­ther de­pre­ci­a­tion in the yuan drove in­vestors to switch their fo­cus back to the weak lo­cal econ­omy.

The Hang Seng in­dex fell 0.7 per­cent, to 23,814.65, the low­est close since July 8. The China En­ter­prises In­dex lost 0.9 per­cent to 10,962.24 points, the low­est close since De­cem­ber 2014. An­a­lysts said Hong Kong's mar­ket suf­fered from the neg­a­tive im­pli­ca­tions of yuan de­val­u­a­tion, the weak­en­ing eco­nomic out­look and the im­mi­nent U. S. in­ter­est rate hike, ham­mer­ing sec­tors in­clud­ing air­lines, prop­erty and autos.

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