London - World shares hovered just off an all-time high and the euro was steady yesterday, as the European Central Bank (ECB) made sure there was little doubt in the minds of investors that global liquidity will continue.
Britain’s FTSE 100 opened up 0.3 percent as it played catch-up after a holiday. The rest of Europe’s main bourses, which saw mostly steady starts, had made gains on Monday following European election results.
Asian trading had been timid too, but another solid session for Japan’s Nikkei and shares in China nudged MSCI’s 45-country all-world index up to 420 points, leaving it just below its 2007 record high of 428.63.
Asset markets around the world continue to be supported by record low interest rates in most of the big economies.
On Monday ECB president Mario Draghi bolstered the already strong expectation that the bank will cut euro zone interest rates again next week and dip back into its unconventional policy cupboard.
Draghi said the ECB needed to be “particularly watchful” for any negative price spiral in the euro zone, and that “more pre-emptive action may be warranted”, citing broad-based asset purchases as one of the ultimate options.
The expectations of monetary easing kept plenty of downward pressure on the borrowing costs of euro zone governments in the region’s buoyant bond markets.
Interest rates on benchmark 10-year German Bunds hovered at 1.358 percent, while Italian bonds consolidated gains they had made on Monday after its government scored a surprisingly easy win in European Parliament elections over the anti-establishment 5-Star Movement of former comedian Beppe Grillo.
In foreign exchange markets, the dollar fell 0.2 percent against a basket of currencies, extending weakness since the end of last week after another retreat in US bond yields.
The euro was at an unchanged $1.3645, with the softer dollar keeping it above its recent three-month lows.
London-based analysts and traders said another big batch of US numbers was the best bet for a bigger market move yesterday after a tight few days of trading, thinned out by US and UK holiday weekends.
Another flurry of merger activity provided additional support for European shares.
In commodities trading, three-month copper on the London Metal Exchange edged to a nearly three-month high as the market reopened after the holiday weekend. US crude futures were up about 0.1 percent at $104.48 a barrel.
Investors kept a wary eye on Ukraine, which launched air strikes and a paratrooper assault against pro-Russian rebels who seized an airport on Monday. – Reuters