Traders work on the floor of the New York Stock Exchange yesterday.
LONDON: European stock markets rose to their highest since the 2008 financial crisis yesterday, helped by signs the US economy is improving and expectations of more pledges of support for growth from major central banks.
US stock index futures also pointed to fresh gains on Wall Street, after the previous session’s stellar run saw the Dow Jones Industrial Average hit an all-time high.
The European Central Bank, the Bank of England and the Bank of Japan are all expected to stick to ultra-easy monetary policy at meetings this week, following on from reassurances by US Federal Reserve officials that their stimulus programme remains in place.
Analysts even see some scope for fresh action in Europe today, giving a 40 percent chance for more bond buying from the Bank of England and a 10 percent likelihood of an interest rate cut from the ECB.
That, combined with some encouraging US economic data this week and China’s promise of record government spending to help sustain growth, pushed world and European share indexes higher yesterday.
“It’s panic buying,” said Nick Xanders, who heads up European equity strategy at BTIG. “At this stage everyone wants to buy it, everyone wants to get involved, and everyone is scared of underperforming.”
The pan-European ESTOXX 50 was up 0.5 percent ahead of the start of US trading as Frankfurt’s DAX jumped 1 percent and London’s FTSE 100 and Paris’s CAC-40 added 0.2 percent.
Those gains, coupled with a rise in Asian shares overnight, pushed the MSCI world index up 0.3 percent and just short of a new 4-3/4 year high.
“Indexes are breaking above big resistance levels, and this is creating room on the upside,” said Lionel Jardin, head of institutional sales at Assya Capital, in Paris. “The sentiment is that central banks are going to remain very accommodative for a while, and at the same time companies are in really good shape, with strong cashflows.”
Still, with the ECB’s meeting in view and worries over the euro zone’s debt crisis again on the rise due to Italy’s political deadlock, German government bonds recovered some poise after a sell-off in the previous session.
As expected, official data confirmed the euro zone ended the year in its second recession since 2009.
Eurostat fleshed out its numbers, showing Germany as the only major euro zone economy to grow in the quarter, at a crawl, while France, Spain and Italy all contracted.
“There’s reasonable downside to the euro. The situation in Italy is still uncertain,” said Bill Diviney, currency strategist at Barclays.
“Although we don’t expect any big changes to President Draghi’s stance, he’s going to stay fairly dovish, given uncertainties,” he added.
The dollar, meanwhile, was slightly higher as investors awaited US jobs and factory orders data to confirm expectations of a revival in demand growth following recent upbeat economic data from the US and China.
Economists expect the ADP employment figures due at 1315 GMT to show 170,000 jobs were created in February versus 192,000 new jobs in January. That will also provide a pointer for “non-farm payrolls” data tomorrow.
Growth-linked currencies were another beneficiary of the broader improvement in sentiment. The Aussie dollar rose 0.2 percent to $1.0280 as data showing moderate economic growth helped it extend its recovery from Monday’s $1.0116 eight-month low.
Commodity markets were more mixed, however, following sharp rises in the previous session.
Despite the increasingly positive mood, there are still some areas of concern, namely the Chinese government’s move to cool the country’s overheated property market, the possible economic impact of US spending cuts, and the deadlock in Italy. Brent oil fell back towards $111 a barrel following news of Venezuelan President Hugo Chavez’s death, copper traders took profits after two days of gains, while gold edged up 0.2 percent to $1,575 an ounce.