European stocks end higher as Wall Street extends its rally
European stocks closed in the green Monday, with investors starting the week in the mood to take on risk following Friday’s rally on Wall Street, and as U.S. stocks extended their march higher.
How markets are trading
The Stoxx Europe 600 index rose 0.5% to end at 383.06. On Friday, the index picked up 0.2% and that helped swing the benchmark to a weekly advance of 0.1%.
France’s CAC 40 was up 0.5% to close at 5,344.26, and Germany’s DAX 30 index tacked on 0.4% to 12,527.04. The U.K.’s FTSE 100 bumped up 0.6% to finish at 7,289.58.
The euro bought $1.2304, up slightly from $1.2298 late Friday in New York. The shared currency was kept in check by European Central Bank President Mario Draghi emphasizing in a speech that the eurozone’s economy still needs stimulus.
What’s driving markets
European stocks rose along with Asian stocks +1.07% whose markets keyed off Friday’s rally on Wall Street that left the major U.S. benchmarks up by more than 1% each. American equity gauges also were rallying in the first part of their session on Monday.
Those gains came after the Federal Reserve’s semiannual monetary report may have eased worries about the prospect of more aggressive policy action. U.S. stock futures leapt early Monday. With talk that the Fed may stick with three interest rate hikes instead of four this year, Treasury yields pulled back and the U.S. dollar fell against major rivals.
Dollar weakness helped lift up dollar-denominated metals prices such as gold and copper. The Stoxx Europe 600 Basic Resources Index was a standout Monday, rising 1.6% as shares of miners followed metals prices higher.
From the Brexit front, Jeremy Corbyn, the head of the U.K.’s opposition Labour Party, said in a speech Monday that his party supports Britain creating a bespoke deal with the European Union that would give the U.K. full access to the EU’s single market.
What strategists are saying
- “Speaking today, Mario Draghi stuck to his view that continued accommodation was necessary, and this was enough to drive the euro sharply lower against the U.S. dollar,” said Chris Beauchamp, chief market analyst at IG, in a note. “Of course, the big event is still to come this week, as the new Fed chairman appears before U.S. lawmakers. Draghi’s dovishness is a given, but Mr. Powell is something more of an unknown quantity.”
- “Confidence has appeared to have returned to the markets following the turmoil seen earlier this month, but traders will be following Powell’s testimony closely in the coming days,” said Mihir Kapadia, CEO of Sun Global Investments, in a note.
PostNL NV tumbled 17% after the Dutch mail and parcel carrier reduced its targets for 2020.
Volkswagen AG shares climbed 1.8%. Deutsche Bank said while the auto maker’s fourth-quarter earnings before interest and taxes missed consensus expectations, the company’s underlying free cash flow “was very strong” and it sees the case for improving earnings quality. Deutsche Bank upgraded Volkswagen’s major shareholder Porsche Automobil Holding to a buy rating from hold, said analyst Tim Rokossa in a research note published Monday.
Hiscox Ltd. shares fell 2.1% as the insurer said pretax profit fell 91% in 2017 as a historic year of catastrophes led to increased payouts.
Associated British Foods PLC shares rose 3.1% after the owner of fast-fashion retailer Primark said it expects to report sales growth at all of its divisions for the first half of fiscal 2018, apart from its sugar unit.
Off the Stoxx 600, Bank of Ireland Group PLC fell 3.3% as the lender posted an 18% decline in pretax profit in 2017 but said it would pay its first dividend in 10 years, or since the global financial crisis.
“The macroeconomic environment and outlook in Ireland and the U.K., which are the group’s key markets, continued to be favorable in 2017, acknowledging Brexit uncertainty continues, but has had no immediate impact on credit quality,” the bank said in its annual-results statement.