European stocks rose on Friday, with Germany’s Dax near an all-time high, as traders’ sentiment improved following news that US policymakers could soon reach a deal on the government’s debt ceiling.
Europe’s region-wide Stoxx 600 and France’s Cac 40 both rose 0.8 per cent, extending gains from the previous session, while London’s FTSE 100 added 0.4 per cent.
Germany’s benchmark Dax index added 0.7 per cent to leave it only a few points below its intraday record high of 16,290, set in November 2021.
“In Europe, and as a result Germany, earnings have done much better than implied by macroeconomic indicators,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics.
Investors on Friday were encouraged by further signs that inflation was cooling. Germany’s producer price index for April showed that the annual rate of inflation had fallen to 4.1 per cent compared with 6.7 per cent in March. The reading was 0.1 percentage points higher than the forecast of economists polled by Reuters.
The index in Frankfurt gained 16.9 per cent since the start of the year, lifted in part by strong earnings in the industrials sector.
“There were supply constraints, so [Germany] couldn’t produce cars to match demand [ . . . ] the semiconductor shortages have really gone away now, so they have been able to increase production”, said Chris Hiorns, a fund manager at EdenTree.
Traders also took their cue from Wall Street’s gains in the previous session, which followed the announcement that policymakers in Washington could vote on a bill to raise the US debt ceiling as early as next week, averting default ahead of the June 1 deadline.
Investors were preparing for public speeches from the European Central Bank president Christine Lagarde and board member Isabel Schnabel, who could offer an indication of the path for the eurozone’s interest rates as they appear at separate events later in the day.
The central bank slowed the pace of its rate increases this month, lifting its deposit rate by a quarter-percentage point to 3.25 per cent and saying it had more ground to cover.
Jay Powell, chair of the Federal Reserve, and Jonathan Haskel, a member of the Bank of England’s Monetary Policy Committee, are also set to speak on Friday.
Contracts tracking Wall Street’s benchmark S&P 500 rose 0.23 per cent, while those tracking the tech-heavy Nasdaq 100 were flat ahead of the New York open.
The yield on interest rate-sensitive two-year Treasury notes was flat at 4.27 per cent. The yield on the benchmark 10-year note gained 0.021 percentage points to 3.67 per cent. Bond yields rise when prices fall.
The dollar index, which tracks the US currency against a basket of six peers, fell 0.35 per cent.
Asian stocks were down, as pessimism over the tech sector stopped the US rally from spreading to the region.
Hong Kong’s Hang Seng index retreated 1.4 per cent, while China’s benchmark CSI 300 stock dropped 0.3 per cent after weak third-quarter results from tech giant Alibaba damped investor sentiment.
China’s onshore currency fell 0.1 per cent to 7.027 against the US dollar, its lowest level since December after China’s April data showed weak consumer spending and industrial production, as well as record-high youth unemployment. The numbers pointed to a faltering economic recovery following the unwinding of its zero-Covid curbs last year.
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