Global markets take heart from stimulus talk
Equities have gained amid the expectation that central banks will provide stimulus to support slowing growth
London — Global stock markets gained on Monday as investors pinned their hopes on stimulus that is expected from the world’s central banks to support slowing growth.
European markets opened higher after data showed a surprise rise in German exports and on the expectation of stimulus by the European Central Bank (ECB) later this week. The pan-European Stoxx 600 index was up 0.1% by 7.47am GMT.
MSCI’s All Country World index, which tracks shares across 47 countries, was up 0.05%.
Germany’s trade-sensitive DAX index rose 0.2% after data showed that seasonally adjusted exports rose 0.7% in July. A Reuters poll of economists had pointed to a drop of 0.5%.
The data was a positive surprise in largely gloomy readouts from major economies since Friday, which heightened the expectation of stimulus from central banks.
On Friday, US jobs growth slowed more than expected in August, while data at the weekend from China showed the country’s exports unexpectedly shrank as shipments to the US slowed.
The two countries have been locked in a trade dispute since early 2018, and investors fear escalating tariffs between them — already curtailing growth — might tip the global economy into recession as early as 2020.
“If all the currently proposed tariffs are implemented, we foresee that growth in the first half of next year will slow towards the brink of a recession,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.
But the prospect of central-bank support kept risk sentiment alive and well. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2% and e-mini futures for the S&P 500 index up 0.15%.
On Friday, China’s central bank cut reserve requirements for a seventh time since early 2018 to free funds for lending. Federal Reserve Board chair Jerome Powell said the Fed would continue to “act as appropriate” to sustain US economic expansion. The European Central Bank (ECB) is expected to cut rates this week.
In currencies, euro fell to a five-day low but recovered ground by 8.20am GMT to trade 0.1% higher at $1.1036.
The dollar was 0.02% higher against a basket of currencies. It traded at ¥106.940, off the one-month peak of ¥107.235 scaled late last week.
The Australian dollar, sensitive to shifts in risk appetite, remained near a five-week peak of $0.6862 set on Friday.
The pound was little changed at $1.2287. Sterling has bounced from a three-year low set a week ago as the threat of Britain leaving the EU without a deal on October 31 seemed to diminish.
But political uncertainty remains, preventing the pound from gaining ground. MPs will vote on Monday on whether to hold an early election.
In fixed income, longer-dated eurozone government bond yields ticked higher, with most yields up three to four basis points in early trade.
Oil rose on the expectation that Saudi Arabia, the world’s largest oil exporter, will continue to support output cuts by Opec and other producers to prop up prices under new energy minister Prince Abdulaziz bin Salman.
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