EU stocks at record peak, Dow breaches 35,000 level

BERLIN: European stocks reached record highs on Monday as miners led gains ater commodity prices surged and optimism about the reopening of economies and easy monetary policy lited sectors that typically benefit from a recovery.

The pan-european STOXX 600 index rose 0.1%, ending at an all-time high, with miners rallying 2.3% to a 10-year-high.

London-listed miners, such as Rio Tinto, BHP Group and Glencore rose between 1.7% and 2.6%. China’s benchmark iron ore futures and steel futures hit all-time highs, and copper prices touched record highs on expectations of improved demand amid tightening supply.

“The boom in commodity prices is good news for the materials or the cyclical sectors,” Rupert Thompson, chief investment officer at Kingswood Group in London, said.

“It cements the idea that you’ve got further rotation towards value and commodity sectors. But on the other hand, you’ve got the clear risk that it does exacerbate worries about inflation.”

Investors will monitor US inflation data later this week to gauge if a strong rise in prices will drive the Federal Reserve to change its policy stance. Weaker-than-expected US jobs data on Friday boosted expectations interest rates will remain lower for longer.

London’s FTSE 100 fell 0.1% hurt by a surge in the pound as British Prime Minister Boris Johnson is set to announce the next phase of reopening from the COVID-19 lockdown.

The European travel and leisure sector declined 1.4%, with highly valued technology stocks dropping 2.4%.

The earnings season entered the home stretch, with about two-thirds of STOXX 600 companies having reported their first-quarter results. About three-quarters of those companies have topped profit estimates, Refinitiv IBES data shows.

“With earnings season winding down and strong seasonality now behind us for the time being it looks like indices will continue to struggle,” said Chris Beauchamp, chief market analyst at IG.

“Historically May is a month of digestion for indices, representing a slowdown in forward momentum from the opening months of the year.”

German biotech company Biontech jumped 8.8% ater revealing plans to build a manufacturing site for its vaccines based on messenger RNA technology (MRNA) in Singapore.

French lender Societe Generale rose 2.9% on plans to pare back risk exposure in its global markets business and focus more on financing and advising on deals.

The stocks rally fuelled by the pandemic recovery continued on Monday when the Dow breached the 35,000 points level.

Iron ore and copper hit historic peaks on demand optimism as economies reopen.

Analysts put the rise in the Dow down to investors being reassured that the US Federal Reserve won’t be forced into quickly reducing stimulus and hiking interest rates by a strong rebound in the economy.

“Picking up where it let off last Friday, when a disappointing nonfarm jobs report seemed to ease concerns that the Fed would start tapering stimulus sooner rather than later, the Dow added another 245 points, propelling it above 35,000 for the first time,” said Connor Campbell at Spreadex.

“That’s a 4,400-point gain in the space of less than four and a half months,” he added.

The Friday report showed that the US economy added only 266,000 jobs in April, far short of expectations of perhaps one million positions.

Commodities also charged higher Monday in part owing to dollar weakness, which makes raw materials priced in the currency cheaper for buyers using rival units.

“Commodities are powering higher on Monday, supported not only by the weaker US dollar but also by reopening optimism and hope of large-scale infrastructure spending in both US and China,” said OANDA analyst Sophie Griffiths.

“China’s benchmark iron ore rallied ... to a record high, and copper also reached a fresh record high.”

Iron ore forged new highs above $220 a tonne, while copper struck an all-time peak at $10,747.50 per tonne -- having already hit records last week.

Meanwhile, ater initially rising ater a vital US pipeline was put out of action by a cyber atack, oil prices turned lower.

The weekend attack hit the Colonial Pipeline Company, the largest in the United States and which ships gasoline and jet fuel from Texas to the East Coast, serving 50 million consumers.