Upbeat economic news helped push European stock markets higher yesterday, while sterling hit a nine-month low against the euro after investors concluded the Bank of England was in no hurry to raise interest rates.
Equities recovered from early falls to nudge into positive territory, with markets in Italy and France 0.4 per cent higher although German stocks dipped.
Britain’s blue-chip FTSE climbed 0.6 per cent to a one-week high, while sterling skidded to a nine-month low at 90.13 pence per euro and pulled back from an 11-month high against the dollar after the BoE left rates at a record low.
BoE governor Mark Carney and his top officials reiterated their message that they might raise borrowing costs by slightly more than investors expect over the next three years, possibly within a year.
Upbeat economic and earnings news were broadly supportive of sentiment in European equity markets, analysts said.
Data yesterday showed Italy’s service sector posted its fastest growth for a decade in July, boosting prospects for the euro zone’s third-largest economy.
Retail sales in the euro zone increased by 0.5 per cent in June on the month, well above market expectations of a 0.1 per cent rise.
Shares in Unicredit climbed almost five per cent after Italy’s largest bank reported forecast-beating profits while British retailer Next jumped nine per cent after returning to sales growth in its latest quarter.
In a further sign that Europe’s economy and the outlook for monetary policy has turned a corner, the Czech central bank raised its main interest rate – becoming the first central bank in the European Union to embark on a new tightening cycle in more than five years.
Trade in US stock market futures pointed to a flat open on Wall Street – a day after the Dow Jones Industrial Average broke the 22,000 barrier for the first time in its 121-year history.
As the impact of the move faded, investors booked profits – pushing Asian shares down and initially sending European stocks lower too.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.7 per cent and South Korea’s tech-heavy Kospi index slumped 1.7 per cent to its lowest level in over three weeks. Seoul shares took an additional hit from President Moon Jae-in’s new tax plan.
The dollar inched away from a 15-month low versus a basket of six currencies, but was still looking wobbly due to doubts about whether there will be another US interest rate rise this year.
US inflation has been contained even as the labour market appears to be in its best shape in many years, with the jobless rate staying near a 17-year low.
The dollar index rose about 0.2 per cent to 92.989. On Wednesday, it slid to 92.548, its weakest level since May 2016.