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Currencies

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Banks

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Currencies

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Banks

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Categorized | Capital Markets, Currencies

Stocks firm on US economic hopes


Posted on March 26, 2014

Wednesday 08:00 GMT. Optimism over the US economy, the prospect of further easing by the European Central Bank and waning market tensions regarding the Crimea crisis are helping European stocks open at two-week highs following a sturdy Asian session.

The positive mood sees industrial commodities gain ground and reduced demand for supposed havens such as Treasuries. Gold, which dropped to a one-month low on Tuesday, is up $5 to $1,315 an ounce even as the dollar index rises 0.1 per cent to 80.02.

    The FTSE Eurofirst 300 is up 0.3 per cent after its Asia-Pacific peer rallied 1 per cent and as US index futures show the S&P 500 adding 3 points to 1,868.

    That would leave the New York benchmark just 10 points below its record high. Stocks have perked up again with Wall Street’s “animal spirits” exhibited in another large acquisition by Facebook and the launch of game developer King’s IPO.

    News that US consumer confidence is at a six-year high has boosted hopes for the world’s biggest economy, allowing investors to shrug off a smaller than expected rise in the S&P Case-Shiller house price index, which was again blamed on the harsh weather.

    “A particularly cold winter and the impact of the recent rise in mortgage rates from near-record lows continue to restrain the sector, though hope remains for a notable recovery during the typically busy spring buying season,” wrote Gennadiy Goldberg, TD Securities economist.

    US interest rates continue to nudge higher, the 10-year yield adding 1 basis point to 2.75 per cent and the more policy-sensitive 2-year note up 3bp to 0.46 per cent.

    That takes the short-term yield to within just several basis points of its highest since May 2011 as the market pulls forward expectations for when the Federal Reserve may begin tightening policy.

    In contrast, German 2-year yields are fractionally softer on the day. At just 0.18 per cent, they reflect the prospect of further policy easing in the eurozone after Jens Weidmann, head of Germany’s powerful Bundesbank, signalled he would support government bond buying under certain circumstances.

    The possibility of even looser ECB policy may be underpinning European stocks but it seems to be weighing on the single currency, which is down 0.2 per cent to $1.3810.

    Also helping sentiment in “risk assets” is the apparent decline in investor angst over the Crimea/Ukraine crisis. The Moscow stock market is up 1.1 per cent and the rouble is firmer by 0.2 per cent against the dollar to Rbs35.14.

    The market’s generally more upbeat mood sees money move into commodities, with copper up 0.5 per cent to $6,608 a tonne and Brent crude adding 11 cents to $107.10 a barrel.

    In Australia, the central bank signalled concern that some lenders are attempting to boost profit growth by easing standards for property loans – highlighting a trend towards loose credit conditions across different assets that is concerning regulators globally.

    In its semi-annual Financial Stability Review, the Reserve Bank of Australia acknowledged that one effect of its loose monetary policy has been to spur housing demand and lift property prices. It is important that banks do not respond to this dynamic by encouraging speculative activity, the RBA said.

    Sydney’s stocks were unfussed, with strength in miners helping the S&P/ASX 200 rise 0.8 per cent. The Aussie dollar is up 0.3 per cent to US$0.9190 – near levels that the RBA characterised as “uncomfortably high” in December, noted Adam Cole, head of G10 FX strategy at RBC Capital Markets.

    A softer yen helped the Nikkei 225 in Tokyo rise 0.7 per cent, matching the gain for Hong Kong’s Hang Seng. Shanghai dipped 0.2 per cent after rising 3.7 per cent in the previous three sessions on hopes for more stimulus from Beijing.

    Additional reporting by Patrick McGee in Hong Kong