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European stocks rally on key EU appointments

European stocks rally on key EU appointments

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LONDON: European stock prices rallied on Wednesday (Jun 3) as the EU finally reached agreement on a number of key appointments, including IMF chief Christine Lagarde as the first female head of the European Central Bank.

Frankfurt's blue-chip DAX 30, London's FTSE and the CAC 40 in Paris were all up by well over half a percent at the close, with Paris even setting a new high for 2019.

On the other side of the Atlantic, Wall Street was also higher with traders looking forward to a shortened session ahead of the US Independence Day holiday.

"You have to look at Europe to understand today's rally," said Franklin Pichard, head of Kiplink Finance. "Will Christine Lagarde, who will take the helm at the ECB in the coming months, be a fan" of accommodative monetary policy, the expert asked.

For the markets, "it seems the answer will be yes".

Lagarde, 63, currently head of the International Monetary Fund, has been nominated to replace Mario Draghi at the ECB's helm, a move central bank watchers believe will see a continuation of the special policy measures to stimulate economic activity in the single currency area.

"Lagarde is seen as maintaining an expansive approach to both conventional and unconventional monetary policies that will support the 19-member eurozone," said OANDA analyst Edward Moya.

She "is not an economist, but she is a respected policymaker that has led the IMF through the aftermath of the financial crisis".

In addition to the ECB nomination, the European Parliament elected Italian social democrat, David Sassoli, as its new president, filling the final top EU job still vacant after the bloc's parliamentary elections in May.

LIMITED UPSIDE?

Traders cautioned, however, that while markets have taken cheer in recent days from an easing in trade tensions between the US and China, concerns about weak global growth are returning to the fore.

"There's growing concern that the upside for stocks is looking limited", noted James Hughes, chief market analyst at Axitrader.

"Concerns continue to propagate that global growth is incredibly fragile."

The release of US jobs data will be closely watched on Friday, with any weak reading likely to put pressure on the Federal Reserve to announce a deeper-than-expected cut in interest rates.

Markets are pricing in a 25 basis-point cut amid calls for double that figure.

Oil prices recovered somewhat on Wednesday after data showed another drop in US crude stockpiles, but the rebound made only a dent in the four per cent slump on Tuesday triggered by weak demand growth worries.

The commodity has endured a volatile week, having surged on Monday as Russia and Saudi Arabia agreed to prolong their output caps.

"Growth concerns continue to weigh on the crude market and the markets are beginning to query to what extent can OPEC+ continue to cut production in sustaining prices," Howie Lee, an economist at Oversea-Chinese Banking Corp, told Bloomberg News.

"Production levels have already been severely reduced and there is limited scope for further supply curbs."

Key figures around 1540 GMT:

 

London - FTSE 100: UP 0.7 per cent at 7,609.32 points (close)

Paris - CAC 40: UP 0.8 per cent at 5,618.81 (close)

Frankfurt - DAX 30: UP 0.7 per cent at 12,616.24 (close)

EURO STOXX 50: UP 0.9 per cent at 3,540.63

 

Tokyo - Nikkei 225: DOWN 0.5 per cent at 21,638.16 (close)

Hong Kong - Hang Seng: DOWN 0.1 per cent at 28,855.14 (close)

Shanghai - Composite: DOWN 0.9 per cent at 3,015.26 (close)

 

Euro/dollar: DOWN at US$1.1278 from US$1.1289 at 2130 GMT

Dollar/yen: UP at 107.90 yen from 107.88

Pound/dollar: DOWN at US$1.2566 from US$1.2593

 

Brent North Sea crude: UP 69 cents at US$63.09 per barrel

West Texas Intermediate: UP 20 cents at US$56.45 per barrel

Source: AFP/de

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