European markets move higher despite German gloom
European stocks markets moved higher yesterday despite a key German business sentiment indicator falling to its lowest level since March 2010, with traders looking towards possible stimulus measures.
After showing modest gains for most of the day, Frankfurt’s DAX 30 index of leading shares closed up 1.10 per cent to 7,047.45 points and Paris’ CAC 40 gained 0.86 per cent to 3,462.83 points, following a call by senior US Fed official for immediate monetary easing.
The London stock exchange was closed for a bank holiday.
In Milan the FTSE MIB index rose 0.89 per cent, while Madrid’s IBEX 35 managed to climb 1.21 per cent despite Spain downgrading its 2010 and 2011 growth figures, showing it barely recovered from the last downturn before plunging anew into recession.
The European common currency bought $1.2516, compared with $1.2512 in New York late on Friday.
The dollar was steady against the Japanese unit, buying 78.68 yen versus 78.66 yen late on Friday.
In Germany, the Ifo measure of business confidence fell for the fourth month running as Europe’s biggest economy shows signs of being affected more and more by the eurozone crisis.
“The German economy is continuing to falter,” Ifo president Hans-Werner Sinn noted, as “companies expressed greater pessimism regarding future business developments.”
Although it still manages to post slim growth rates, a raft of recent economic data, ranging from foreign trade statistics to industrial orders, new car registrations and investor confidence, suggests that momentum is fading.
But investors were looking ahead to what central bankers may say about stimulus measures when they meet this week at an annual retreat in the United States.
“Current moves are all about the markets appetite for risk assets and whether the three main central banks of the world will be doing their bit to give these markets a liquidity boost,” said Andrew Taylor at FX360.
US Federal Reserve Chairman Ben Bernanke is to address on Friday the annual gathering of central bankers in Jackson Hole, Wyoming, with markets anticipating details on how the Fed might encourage economic activity in the world’s biggest economy.
Investors will also be looking for a clues about the European Central Bank’s plans for a new programme to buy up bonds of struggling eurozone countries, as well as any signals China could stoke up its slowing growth rate with an easing of monetary policy.