Wall Street set to extend highs
The rally on Europe’s main equities markets is continuing, after fresh prices data for the eurozone did not contain any unpleasant surprises ahead of this week’s European Central Bank policy meeting.
The region-wide FTSE Eurofirst 300 is up 0.4 per cent, with the Xetra Dax 30 in Frankfurt 0.2 per cent higher and the CAC 40 up 0.1 per cent. London’s FTSE 100 is also up 0.4 per cent.
US equities markets are expected to extend their gains, with the S&P 500 called up 0.1 per cent by futures trading, enough for it to set its sights on another record close. It reached an unprecedented 1,973.0 on Thursday.
There has already been insight into the jobs market from ADP Research’s national employment survey. It bear forecasts showing the creation of 281,000 jobs in June, up from the 187,000 average over the past six months and predictions in a Reuters poll of 205,000. The ADP data comes out a day ahead of the full June non-farms payroll jobs report, which is published on Thursday rather than Friday due to the Independence Day public holiday.
Investors will be also watching for a speech from the Federal Reserve’s chairwoman, Janet Yellen, on financial stability due at 11am Washington time.
Eurozone producer prices data for May met forecasts, showing a month-on-month fall of 0.1 per cent and a year-on-year decline of 1 per cent. The data are of added interest ahead of the outcome of the European Central Bank’s policy meeting on Thursday. While the ECB is not expected to take further action this month – after taking one of its benchmark interest rates below zero in June – its ongoing battle with deflation is keeping investors tuned into price data.
The pound is extending its gains against both the dollar and the euro after more strong UK economic data. The Markit/CIPS purchasing managers’ index for the construction sector in June beat forecasts and pointed to strong growth, reading 62.6, better than the 59.5 forecast in a Reuters poll. The numbers add to the trend for signs of deepening economic expansion, stoking speculation that the Bank of England could have more room to raise interest rates as early as late 2014.
Sterling reached a session high of $1.7176 after the data, a gain on the day of 0.3 per cent and taking it deeper into territory last seen in dollar terms in October 2008. It revisited levels last seen then on Thursday after manufacturing PMI data beat forecasts.
Against the euro, the pound is up 0.3 per cent at €1.2570.
On sovereign debt markets, the yield on Germany’s 10-year debt is up 1 basis point at 1.25 per cent, while the UK’s 10-year borrowing costs are flat at 2.71 per cent. Benchmark 10-year US Treasury yields are down 1 basis point at 2.56 per cent.
Emerging markets have benefited from the bullishness. The FTSE emerging markets index gained 0.9 per cent today, lifting the gauge its highest since May 2013. The gains come as investors confidence in growth prospects picks up.
Asian markets followed Wall Street’s rally with their own solid gains.
Japan’s Nikkei 225 gained 0.3 per cent. The Hang Seng in Hong Kong rose 1.6 per cent and in Australia the S&P/ASX 200 added 1.5 per cent.
The Shanghai Composite underperformed, ticking up just 0.4 per cent amid some concern about the outlook for the country’s economy, even recent solid economic data.
“There are still headwinds for the [Chinese] economy, first and foremost from the investment side,” said Nikolaus Keis, economist at UniCredit. “Efforts to slash overcapacities in old-fashioned industries, as well as the housing market downturn, will continue to weigh on overall economic activity.”
South Korea’s won hit a fresh five-year high against the dollar of Won1,009.95, a gain of 0.2 per cent, while Taiwan’s dollar also rose 0.2 per cent.
The Australian dollar slid 0.4 per cent to US$0.9460, however, after trade data showed the nation’s exports declined by 5 per cent in May compared with April.
Exports of metal ores and minerals fell by 9 per cent. Imports also fell 1 per cent on the month, swelling Australia’s trade deficit for May to an unexpectedly high A$1.9bn (US$1.8bn).
Source: ft
