Share prices inch up in Europe and Asia

EUROPEAN and Asian share prices inched higher yesterday as trading in some of the world’s major financial markets resumed after a Christmas break.

Concerns about Italian banks, Chinese growth and US president-elect Donald Trump’s protectionist bent look set to keep investors on edge into the start of next year.

But expectations the new administration will splash out on a fiscal boost for the US economy also has markets expecting inflation and more growth overall.

Data yesterday showed Chinese industry racked up its strongest profit growth in three months in November, suggesting the world’s second-largest economy was improving.

In Japan, however, core consumer prices fell in annual terms for the ninth month as household spending slumped.

“Markets have calmed down a lot since the US election and the decisions by the ECB and Fed [earlier this month],” bond market strategist Daniel Lenz said.

“There is a feeling that some of the expectations after the Trump election may have been exaggerated and now it is a question of waiting to see what the US government will look like when it finally takes shape.”

Germany’s DAX and France’s CAC 40 both gained about 0.1%, while Spain’s IBEX dipped by a similar amount.

British markets were closed for a holiday, along with those in Australia, New Zealand and Hong Kong.

MSCI’s broadest index of Asia-Pacific shares outside Japan was marginally higher, while Japan’s Nikkei closed little changed.

“It is the time of the year when markets trade with hushed tones,” IG market strategist Jingyi Pan said.

“The magnitude of moves could remain capped with thin market trades expected to remain the case.”

China’s CSI 300 index was down 0.1% and the Shanghai Composite slipped almost 0.2%, despite the upbeat industrial data.

The yen fell following the inflation numbers but was still about ¥1 stronger than lows hit after the US Federal Reserve raised dollar interest rates two weeks ago.

In a currency market expected to trade conservatively into the end of the year, strategists say they will be watching chiefly for any sign of a squeeze in the cost for banks of borrowing dollars relative to other currencies.

Such costs – called the cross-currency basis – have been rising and could support the dollar over the next few days.

London’s Commerzbank strategist Lutz Karpowitz said: “The rise in the euro-dollar basis is an argument for dollar strength.

“Plus you have the fundamental factors going into the beginning of next year that point [that way].” — Reuters