Marc Jones London
EUROPEAN stocks and the dollar made solid starts to the second quarter yesterday as signs of a recovery in the euro zone and expectations of more good US news cheered investors after their blow-out in the last few months.
Banks led European stocks higher after equities completed their biggest quarterly advance since 2009. The Stoxx Europe 600 index added 0.4 percent to 398.68 at 1.47pm in London.
It pared gains of as much as 0.9 percent after the ADP Research Institute said US companies added 189 000 workers to payrolls in March.
The Stoxx 600 earlier reversed a drop of as much as 0.5 percent after a final Markit Economics update showed euro-area manufacturing grew more than initially estimated.
The equity gauge rallied 16 percent in the first quarter, with carmakers leading gains, as the European Central Bank (ECB) pushed on with its e1 trillion (R13 trillion) quantitative easing programme and economic data beat forecasts by the most in two years.
“Data in Europe keeps on surprising us, and stronger growth is precisely what will drive markets higher from here,” said Didier Duret of ABN Amro Bank’s wealth-management unit.
“The economic landscape will continue to improve as all the positive shocks from the first quarter - the ECB, the low euro, and low oil prices - start feeding into the recovery now. This momentum will impact the banking sector positively.”
Euro zone bonds also remained in favour while oil remained under pressure amid hopes of an Iran nuclear deal that is expected to loosen sanctions on the Opec member.
Currency markets stayed mostly in recent ranges after a tumultuous few months.
After a dip in Asia, the dollar edged back up to $120.15 (R1 444) versus the yen and to $1.0750 per euro after the euro made its worst ever start to a year in the first quarter.
“I would be surprised if we had a similar quarter again considering the performances of the dollar and the euro over the last few quarters,” said Derek Halpenny, the European head of global markets research at Bank of Tokyo Mitsubishi in London.
“With no policy (rate hike) announcement likely in the second quarter from the Federal Reserve, that reduces the scope for significant moves. Also the bulk of global easing that has helped fuel the dollar is probably behind us now.”
More signs that the ECB’s stimulus programme is bearing fruit came as euro zone manufacturing activity accelerated faster than previously thought last month to hit a 10-month high.
Data from China was less robust, bolstering the view that Beijing has to provide more stimulus to keep growth on track, with some analysts eyeing moves to directly push down the yuan’s value.
The HSBC/Markit China Manufacturing Purchasing Managers’ index (PMI) came in at 49.6, slightly higher than a preliminary “flash” reading of 49.2 but still below the 50-mark separating contraction from expansion. An employment sub-index contracted for a 17th consecutive month, falling to its lowest since August.
Shares in Shanghai gained 1.4 percent however, on the hope of more stimulus. The rest of Asia was subdued.
Bourses in the red included Japan, South Korea, Australia, Malaysia and Indonesia. Japan’s Nikkei sank 0.9 percent after a lacklustre Bank of Japan business survey.
After Greece failed on Tuesday to reach an initial deal on reforms with its lenders, Athens was the only bourse in the red in Europe. – Reuters