European stocks gain on US interest rate hopes

European stocks gain on US interest rate hopes

London Stock Exchange LSE
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LONDON: Europe's main stock markets were mostly higher on Thursday (Jul 13), boosted by remarks from Federal Reserve chief Janet Yellen suggesting US interest rates would not rise as rapidly as speculated.

Europe's main indices had already jumped by between 1.2 per cent and 1.6 per cent on Wednesday after Yellen pledged a "gradual" approach to US interest rate increases.

"It's a promise of not hiking rates too fast and not being too 'data driven' in the normalisation process," said Vincent Deluard of brokerage INTL FCStone.

"There was this fear in the market that the era of easy money was going to end more abruptly than thought," Deluard told AFP.

"It's reassuring to see that the world's largest central bank is still not-too-hot, not-too-cold" over its rate stance, he said. "The fact that the Fed is dialling back a bit ... is reassuring," he added.

London Capital Group analyst Ipek Ozkardeskayaa lso said that risk appetite is back in force after Yellen hinted that the cost of borrowing could rise slower than previously thought. analyst Fawad Razaqzada agreed.

"Yellen came across as more dovish than expected. Stock markets love low interest rate levels and for that reason they were able to rise sharply which lifted the Dow to a new all-time high," he said.

Playing catch-up following another overnight record-high on Wall Street, Asian indices mostly surged Thursday.

In closely-watched testimony to Congress, Yellen said the US central bank would keep lifting borrowing costs as long as the world's top economy showed improvement, taking into account inflation remained below its two per cent target.

The remarks lit a fire under equities, with the Dow posting its highest close, on the prospect that money would continue to be cheap for the time being.

The Fed is watching developments carefully, Yellen told the House Financial Services Committee during the first of two days of testimony on Capitol Hill.

Later on Thursday, she will appear before the Senate Banking Committee.

In Asia, Hong Kong stocks jumped 1.2 per cent to its highest level since mid-2015 and Sydney climbed 1.1 per cent.

Shanghai was 0.6 per cent stronger after data showed Chinese imports and exports both rose more than expected in June thanks to a pick-up in global demand.

Tokyo ended flat however with early gains eroded by a stronger yen, which hit exporters.

While equity markets were mostly sharply higher, the dollar came under pressure as expectations for further monetary tightening from Washington this year eased.

There had been talk of late that the Fed would announce up to two more increases in rates before the end of the year.

Adding to downward pressure on the greenback is the ongoing crisis surrounding US President Donald Trump after his son released emails showing he had embraced Russia's efforts to support the tycoon's presidential campaign against Hillary Clinton.

The White House has been battered by accusations over Russian collusion and accusations of cover-ups - fuelling worries about the president's ability to push through his market-friendly economic agenda.

Key figures around 1545 GMT:

New York - DOW: UP 0.01 per cent at 21,553.02 points
London - FTSE 100: FLAT at 7,413.44 (close)
Frankfurt - DAX 30: UP 0.1 per cent at 12,641 (close)
Paris - CAC 40: UP 0.3 per cent at 5,235.40 (close)
EURO STOXX 50: UP 0.4 per cent at 3,527.83 (close)

Tokyo - Nikkei 225: FLAT at 20,099.81 (close)
Hong Kong - Hang Seng: UP 1.2 per cent at 26,346.17 (close)
Shanghai - Composite: UP 0.6 per cent at 3,218.16 (close)

Euro/dollar: DOWN at US$1.1391 from US$1.1404
Pound/dollar: DOWN at US$1.2921 from US$1.2927
Dollar/yen: FLAT at 113.38 yen

Oil - Brent North Sea: UP 63 cents at US$48.37 per barrel
Oil - West Texas Intermediate: UP 73 cents at US$46.22

Source: AFP/de