Frankfurt shares lead Europe markets higher

World stocks were mostly upbeat yesterday with Wall Street pushing for new records, Tokyo hitting a two-decade peak and Frankfurt leading Europe higher ahead of key central bank decisions on both sides of the Atlantic. Well-perceived corporate earnings were behind much of equity markets’ confidence, while Wall Street also welcomed stronger-than-expected jobs data and seemed hopeful that Donald Trump’s ambitious tax plans will finally become reality.

*Traders work at the Frankfurt Stock Exchange. The DAX index yesterday gained a solid 1.8% to 13,465.51 by the close as German investors played catch-up after a bank holiday and a weaker euro gave a boost to exporters.

 

“US stocks are in the green in midday trading, with tax reform optimism and upbeat earnings joining a better-than-expected jobs report and still-solid manufacturing activity to lift the markets,” brokers Charles Schwab said summing up market sentiment. In Europe, Frankfurt’s DAX index was up a solid 1.8% at 13,465.51 by the close as German investors played catch-up after a bank holiday and a weaker euro gave a boost to exporters.

Paris followed suit with much more modest gains, while London ended almost unchanged, with the benchmark FTSE 100 failing to capitalise much on a soft pound. Many investors felt jittery ahead of a key Bank of England decision today on interest rates, which are widely expected to be hiked to counter Brexit-fuelled inflation. If so, this would be the first British rate rise since 2007.

The London market was also hampered by weakness among clothing retailers after a trading update from Next which also weighed on rival Marks & Spencer. Across the Atlantic, the Federal Reserve is expected to keep US monetary policy unchanged at the conclusion of a two-day meeting late yesterday. But its announcement will be scrutinised for clues as to a December rate increase, a scenario made more likely by data yesterday showing strong US private-sector hiring.

Looming over the decision is President Donald Trump’s announcement due today of his pick to replace Fed chair Janet Yellen. Jerome Powell is tipped as the front-runner, with investors pricing in his potential appointment over the more hawkish John Taylor. Meanwhile, optimism was fuelled by congressional Republicans prepared to unveil President Donald Trump’s long-anticipated tax cut plan.

Traders are also keeping a close eye on key American payroll data out tomorrow. The New York attack by a truck driver that killed eight people, and Trump’s vow to ensure more robust “extreme vetting” of travelers to the US, did not appear to affect investor decisions. Oil prices had a roller-coaster day, rising strongly after a big drop in US inventories before falling back as analysts recommended profit-taking in an overbought market. “The market is breathing rarefied air,” said Neil Mellor, at BNY Mellon.

 

Sources and photo-credits: Gulf Times