European stock markets extended a rally yesterday and the dollar edged higher, but with Wall Street closed for the Labour Day public holiday gains were limited in sluggish trading.
“It’s been a very calm day and we are lacking catalysts to support the gains,” said analyst Arnaud de Champvallier of Turgot Asset Management.
European and US markets surged on Friday after the US Labour Department reported that far fewer US jobs had been lost in August than had been feared, prompting hopes the US economy could avoid another sharp downturn.
In London the FTSE 100 index added 0.20 per cent to close at 5,439.19 points while in Paris the CAC 40 rose 0.34 per cent to 3,684.73. The Frankfurt DAX gained 0.33 per cent to end the day at 6,155.04 points. Elsewhere there were gains of 0.22 per cent in Madrid, 0.10 per cent in Milan, 0.36 per cent in Amsterdam and 0.27 per cent on the Swiss Market Index.
On the currency market the dollar dipped in early trade as the strong US employment data encouraged investors to take on riskier assets such as the single European currency, the euro.
But the US unit reversed the trend in afternoon deals, when the euro had slipped to $1.2883 from $1.2895 late on Friday in New York.
The dollar was meanwhile at 84.21 yen after 84.32 on Friday.
Currency traders were showing caution as they awaited key monetary policy decisions from central banks on Japan on Tuesday, Canada on Wednesday and Britain on Thursday. The pound sterling weakened against the dollar, with the market anxious to know if the Bank of England on Thursday will take further measures to shore up the British economy.
Bank policymakers at their August meeting discussed an extension to the BoE’s quantitative easing policy, whereby it creates money by purchasing bonds from commercial institutions, but decided against the move despite tight credit conditions.
In Paris Dexia bank fell 2.27 per cent and media and technology group Lagardere lost 1.51 per cent. Both companies will be removed from the CAC 40 and transferred to a smaller exchange on September 20.