TM:Stocks inch higher; euro falls on ECB easing bets
LONDON, May 15 — European stocks followed Asia higher today while the euro fell as investors bet central banks in developed markets would continue their monetary support, with the European Central Bank poised to cut interest rates next month.
Emerging stocks were the biggest winners from expectations for more stimulus, hitting a 6½-month high, while stronger-than-expected German first-quarter economic growth data pushed the benchmark German bond yield off one-year lows.
ECB President Mario Draghi signalled last week that the bank was poised to ease monetary policy next month to support the economy. Federal Reserve Chair Janet Yellen has said the US economy needed support, while expectations have been growing China might unveil stimulus.
“There’s a good chance we will see a small positive surprise in euro zone (growth) numbers,” said Jan von Gerich, chief fixed income analyst at Nordea. “But I don’t think we will see a big back-up in yields with ECB easing in the pipeline.”
European stocks rose 0.2 per cent, having hit a six-year peak, while Germany’s DAX set a new record high. Asian stocks also rose a quarter per cent.
The MSCI world equity index rose slightly on the day, dragged lower by declines in Tokyo and Shanghai shares.
Emerging stocks rose a quarter per cent, bringing year-to-date gains to 3.8 per cent.
The euro fell nearly 0.2 per cent to US$1.3690, off last week’s 2½-year high. German 10-year Bund yields traded at 1.38 per cent.
“Except for quantitative easing, which it likely won’t resort to for a while, the ECB does not have a lot of easing options at its disposal to keep the euro down,” said Masafumi Yamamoto, market strategist at Praevidentia Strategy in Tokyo.
“Therefore it will have to keep sending a steady message, saying it will ease a step at a time. The various ECB officials will also have to march in unison and convey the same message, especially with the dollar also showing signs of weakness.”
US crude oil and Brent crude futures both fell. The dollar rose 0.15 per cent against a basket of six major currencies. — Reuters
