US stocks followed Europe higher yesterday while the euro weakened against the dollar after the European Central Bank’s Thursday decision to extend its stimulus programme.
US Treasury yields climbed with benchmark yields on track for a fifth straight week of increases following stronger-than-forecast Chinese inflation data and ahead of $56 billion of coupon-bearing government bond supply next week.
European shares hit their highest level since January and were set for their best week since February, following the ECB’s
decision to cut monthly bond buys to €60 billion from €80 billion and extend purchases to December – three months longer than analyst forecasts.
Stocks were helped by inflation data from China, rising prices of some commodities and general optimism after the ECB decision and before a US Federal Reserve statement due out on Wednesday.
The ECB’s indication it would extend monetary support for as long as needed complemented the promise from US President- elect Donald Trump of fiscal stimulus, according to analysts. But some participants said 2016 could be the high watermark for monetary easing, less than a week before the US Fed is widely expected to raise over-night
interest rates.
The Dow Jones industrial average was up 47.49 points, or 0.24 per cent, to 19,662.3, the S&P 500 gained 6.63 points, or 0.3 per cent, to 2,252.82 and the Nasdaq Composite added 25.22 points, or 0.47 per cent, to 5,442.57.
Europe’s Stoxx 600 was up 0.6 per cent even though European bank stocks pulled back 0.4 per cent. Reuters reported that the ECB had rejected a request from Italy’s Monte Paschi for more time to raise cash. The continent’s banking sector was still up almost 10 per cent for the week, its biggest weekly jump since December 2011.
The euro dipped for a second day, after Thursday’s ECB news caused its biggest daily loss against the dollar since Britain’s vote to leave the EU in June.
The euro was trading around $1.0543, down 0.7 per cent against the dollar and down 1.2 per cent for the week. The dollar was up 0.6 per cent on the day up 0.9 per cent for the week against a basket of major currencies.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.3 per cent, though it posted a weekly gain of 1.9 per cent. Japan’s Nikkei ended 1.2 per cent up at its highest close since December 2015.
Oil rose on growing optimism that non-Opec producers might follow the cartel’s lead by agreeing to cut output.
US crude added 1.4 per cent to $51.54 a barrel. Brent crude rose 0.7 per cent to $54.24.
Spot gold was down 0.7 per cent and was set for a weekly decline of 1.2 per cent, pressured by the stronger US dollar and expectations of a Fed rate hike.