Global equity markets rose on a fresh round of strong US economic reports yesterday, while German bond yields edged up from record lows as expectations that the European Central Bank would ease monetary policy next week faded.
Although eurozone inflation dropped to a five-year low, it was not enough of a decline to force the ECB to enact monetary stimulus, analysts said. The data initially put a damper on European shares until new signs of an improving US economy led to a rebound.
US consumer spending fell in July for the first time in six months, but a rise in consumer sentiment in August to a seven-year high suggested the retrenchment was likely temporary. Other data showed a sharp acceleration in factory activity in the Midwest, underscoring the US economy’s relatively strong fundamentals.
Charlie Smith, chief investment officer at Pittsburgh-based Fort Pitt Capital Group, said he sees room to run in the five-year bull market because the outlook for earnings and economic data continue to improve, even though some investors are convinced the market is overvalued.
European stocks closed higher, while Wall Street was mostly higher. MSCI’s gauge of worldwide stock performance also rebounded, gaining 0.08 per cent.
The Dow Jones industrial average fell 1.26 points, or 0.01 per cent, to 17,078.31. The S&P 500 rose 3.93 points, or 0.2 per cent, to 2,000.67, and the Nasdaq Composite is added 16.43 points, or 0.36 per cent, to 4,574.12.
The FTSEurofirst 300 index of top European shares closed up 0.33 per cent at 1,373.82 points.
European bond yields fell sharply across the eurozone at the start of the week after ECB President Mario Draghi highlighted a significant drop in inflation expectations in a speech at a meeting of central bankers in Jackson Hole, Wyoming. Draghi’s comments raised expectations that the ECB would soon deploy a large-scale purchase of assets, known as quantitative easing, or QE. That view helped weaken the euro and boosted enthusiasm for stocks on both sides of the Atlantic.
German 10-year Bund yields, the benchmark for eurozone borrowing costs, rose one basis point to 0.89 per cent, having hit a record low of 0.86 per cent on Thursday.
The benchmark 10-year US Treasury fell slightly, lifting its yield to 2.3360.
The euro retreated, falling 0.29 per cent to $1.3144. having risen as high as $1.3195 soon after a report on euro zone inflation.
Against the yen, the dollar was up 0.32 per cent at 104.03.
US crude oil rose for a fourth straight day as the Midwest manufacturing data pointed to strong demand.
Brent for October delivery rose 47 cents to $102.93 a barrel. US crude gained 85 cents to $95.40 a barrel.