European stocks rise on US rate outlook

European stocks rise on US rate outlook

Stocks in the financial sector, in particular, received a boost from the outlook for higher rates which would help improve banking margins.

LONDON: Global equity markets rose on Wednesday (Feb 15) as investors reacted to fresh indications that US interest rates could climb as early as March.

Stocks in the financial sector, in particular, received a boost from the outlook for higher rates which would help improve banking margins.

"Once again banking shares were the fuel that helped the market rise," said Andrea Tueni, an analyst at Saxo Banque in Paris.

US inflation data published on Wednesday supported the view that a Federal Reserve monetary tightening is imminent.

Consumer prices in January rose at their fastest pace in nearly four years, a fresh sign that a pickup in inflation may be approaching, Labour Department figures showed.

The numbers "exceeded expectations and should feed into the narrative that the economy is improving and the Fed should continue raising rates", said Craig Erlam at Oanda.

This added to cheer prompted by upbeat remarks on the US economy by Fed boss Janet Yellen on Tuesday and her suggestion that US borrowing costs could rise as early as next month.

'HAWKISH TESTIMONY'

Wall Street had Tuesday risen to record highs for a fourth successive day as Yellen reinforced the view that the world's top economy was in rude health, with the jobs market improving and inflation heading to the Fed's two percent target.

Market "bullishness stems from hawkish testimony by Janet Yellen... giving a fillip to a key financial sector whose profitability benefits from higher interest rates", said Accendo Markets analyst Mike van Dulken.

In company news Wednesday, European stock market operator Euronext said cost-cutting enabled it to lift profits last year despite market volatility triggered by Brexit and the US elections.

Shares in troubled conglomerate Toshiba plunged almost nine percent - extending Tuesday's eight percent decline - after warning it faced a 390 billion yen (us$3.4 billion) loss in the fiscal year to March, hit by a 700 billion yen writedown at its US nuclear unit Westinghouse.

The news prompted its chairman to resign while it also hinted at another accounting scandal following a profit-padding crisis in 2015.

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Looking ahead to later in the day, "focus will be very much on the US as we await Janet Yellen's second day of testimony", said Erlam.

"Inflation, or a lack thereof, has long been a problem for the Fed with policymakers clearly wanting to begin and then speed up the tightening process but it seems, gradually, pressures are building," he added.

Yellen on Tuesday confirmed the next US rate rise could come at any time, which leaves open the possibility of a move at the Fed's Mar 14-15 policy meeting.

Source: AFP/de

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