Monday, 16 March 2015 19:04
LONDON: European stocks rallied Monday on optimism over quantitative easing in the eurozone, with Frankfurt topping 12,000 points for the first time, but the euro struck another 12-year dollar low.
Germany’s leading stock market index smashed through the psychologically important level, one week after the European Central Bank began its 1.14-trillion-euro ($ 1.201-trillion) bond-buying stimulus.
Frankfurt’s benchmark DAX 30 hit a record intra-day peak at 12,054.30 points. It later stood at 12,038 points, up 1.15 percent from Friday’s closing level.
London’s FTSE 100 index rose 0.53 percent to 6,775.90 points in late morning deals, and the CAC 40 in Paris added 0.76 percent to 5,048.30 points.
“The benefits of the ECB’s QE policy continue to drive European equities higher with the DAX leading the way,” said market analyst Alastair McCaig at traders IG.
“Germany continues to spearhead the move higher for the rest of the eurozone.”
The region’s equity markets scored solid gains despite news that New York oil prices have slid to a six-year low on the back of a global supply glut, traders said.
In foreign exchange activity, the dollar rocketed to a fresh 12-year high against the euro, ahead of a key US Federal Reserve policy meeting later this week.
The European single currency tanked as low as $ 1.0458 in earlier Asian trading hours, striking the lowest level since early January 2003. It later stood at $ 1.0541, up from $ 1.0489 late in New York on Friday.
Investors are keeping their focus on the Fed’s policy meeting Wednesday, seeking a clearer timeline for when it will raise interest rates as the US economy strengthens.
“The relentless climb of the US dollar will come under further scrutiny this week as the US Federal Reserve meets,” said Currencies Direct dealer Alistair Cotton.
“The market is looking for changes to the wording of the press release, with the possible removal of the word ‘patient’ from language about rate hikes to indicate that we remain on course for a first rate increase in June.”
Global markets took a hit last week and the dollar rallied in reaction to a strong US jobs report that increased the likelihood of a summer rate rise.
But while equities have settled, the dollar continues to soar against the euro, which has also been battered by the ECB’s new bond-buying stimulus programme.
“The divergence in policy expectations between the Fed and the ECB has been the primary driver of downside pressure in euro/dollar,” noted Rabobank analyst Jane Foley.
“However, the start of QE from the ECB has also provided fresh incentive to eurozone stock markets.”
In Asia on Monday, Shanghai was the stand-out stock market, extending last week’s gains after Chinese Premier Li Keqiang said the government had enough in its armoury to support the world’s number two economy.
Shanghai jumped 2.27 percent to 3,449.31 — its highest since August 2009 — and Hong Kong added 0.53 percent.
Tokyo’s Nikkei, which on Friday closed above 19,000 points for the first time in 15 years, edged down by 8.19 points to finish at 19,246.06.
Sydney dropped 0.29 percent, while Seoul was marginally higher.
Copyright AFP (Agence France-Presse), 2015
