World stocks shrugged off worries over political turmoil in Egypt and rallied strongly Thursday on optimism that easy monetary policy from central banks in Europe is set to continue for some time to come.
The biggest gains were in Britain, where the Bank of England surprised markets after its first monetary policy meeting held under its new governor, Mark J. Carney. It said afterward that expectations it would raise rates in coming months were unwarranted, despite the improving economic backdrop.
Meanwhile, the European Central Bank kept rates at record low rates. Its president, Mario Draghi, said for the first time that the central bank would keep rates there “for an extended period of time.”
Stocks surged after each statement.
Britain’s FTSE 100 index jumped 3.1 percent to close at 6,421.67 points while Germany’s DAX rose 2.1 percent to 7,994.31. France’s CAC 40 gained 2.9 percent to 3,809.31.
United States markets were closed for Independence Day.
The central bank statements contributed to strong declines in the euro and British pound against the dollar. Looser monetary policies tend to weaken a currency as low interest rates mean lower returns on investments and more attractive opportunities can be found elsewhere. The euro fell 0.7 percent to $1.2916, while the British pound fell 1.4 percent to $1.5066.
Financial shares were among the strongest gainers, with Royal Bank of Scotland stock rising 5.1 percent, Barclays up 4.7 percent and HSBC up 4.6 percent.
Earlier in Asia, Hong Kong’s Hang Seng Index was the strongest gainer, rising 1.6 percent to 20,468.67 points. China’s Shanghai Composite rose 0.6 percent to 2,006.10.
Tokyo’s Nikkei 225 bucked the trend, slipping 0.3 percent to 14,018.93, despite remarks from the Bank of Japan governor, Haruhiko Kuroda, that the country’s economy is headed for recovery.
The dollar gained fractionally against the yen, just passing the 100-yen mark to 100.01 yen.
Mike McCudden, head of derivatives at Interactive Investor, noted that while physical exchanges are closed on Wall Street, futures are still trading, and they indicated Wednesday’s rally on the back of economic data has continued, with Dow Jones industrial index futures now trading above 15,000. The index closed at 14,988.50 Wednesday.
“Whether this can be sustained will clearly be reflected by what’s happening on a global basis,” he said in a note on markets. “The situation in Egypt remains hugely sensitive, whilst resurgent euro zone woes could knock sentiment.”
Investors around the world were also keeping a close watch on the price of oil, which has passed $100 a barrel for the first time since May 2012 because of Wednesday’s events in the Middle East: Egypt’s military overthrew Mr. Morsi, the country’s first democratically elected president, after he defied calls to resign despite the demands of millions of protesters.
Egypt is not an oil producer but its control of the Suez Canal — one of the world’s busiest shipping lanes, which links the Mediterranean with the Red Sea — gives it a crucial role in maintaining global energy supplies. Oil has eased somewhat from its Wednesday highs and was down 41 cents to $100.83.
Over the last few weeks, markets have sputtered amid speculation that the Federal Reserve might taper off its policy of buying $85 billion in bonds every month to keep interest rates low and encourage spending.
But on Wednesday, unemployment and jobs data out of the United States were just right for stocks, analysts said: good enough to restore confidence that the American economic recovery is continuing, but not so good that the Fed is likely to pull back on stimulus.
“We have had a period of extreme volatility, and now we have some settling going on,” said Lorraine Tan, director at Standard Poor’s equity research in Singapore. “I think there’s a realization that the reaction may have been overdone.”
Article source: http://www.nytimes.com/2013/07/05/business/daily-stock-market-activity.html?partner=rss&emc=rss
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