US stocks wavered Thursday and finished barely higher as an interest rate cut by the Bank of England, a move meant to shore up the British economy, wasn’t enough to get investors out of their recent cautious mode. The Shanghai Composite was 0.2% lower.
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In addition, the BoE announced a range of other measures to stimulate the economy, including a +£100B scheme to force banks to pass on the low interest rate to households and businesses.
Meanwhile, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5 per cent, led by gains in resource shares, recovering some ground lost in Wednesday’s 1.5 per cent decline. Japan’s Nikkei .n225 advanced 0.6 percent.
“BoE Governor Mark Carney’s assessment of the post-Brexit U.K. economy was very negative, predicting the unemployment rate will rise from 4.9 percent to 5.5 percent over the next two years despite the new stimulus”, Angus Nicholson, market analyst at IG in Melbourne, wrote in a note.
The measures seemed to exceed the expectations of investors.
UK’s benchmark FTSE 100 closed up by 1.52 percent, the pan-European FTSEurofirst 300 ended the day up by 0.64 percent, Germany’s Dax ended up by 0.48 percent, France’s CAC finished the day up by 0.41 percent.
Now that the central bank has acted, analysts say, the government also needs to step in by providing clarity on Britain’s future relations with the European Union and by encouraging growth with government spending and tax incentives.
She said Carney had through his comments signaled to the new Treasury chief, Philip Hammond, that the government needs to come up with a plan to make the economy more competitive and invest in infrastructure.
Last month’s employment print showed that the U.S. added a whopping +287k jobs in June, signaling renewed momentum in the USA labor market.
A strong reading there could help the dollar by reviving expectations that the Federal Reserve could raise interest rates later in the year, a scenario that had been completely discarded in the days that followed the shocks from Brexit vote. The Labor Department said Thursday applications for unemployment aid rose to 269,000 last week, a level close to historical lows and a positive sign for the job market. MSCI’s world stocks index .miwd00000pus rose 0.3 percent. The number of Americans collecting unemployment benefits has fallen more than 5 percent in past year, but the pace of hiring and economic growth slowed in the first half of 2016. Earlier in the Asian session, the Aussie shrugged off disappointing retail sales data which only underscored the conditions that prompted the Reserve Bank of Australia (RBA) to cut rates earlier this week. “The bigger picture is that wage growth will likely remain too week to create major cost pressures”, said Marcel Thieliant of Capital Economics in a report.
ENERGY: Benchmark U.S. crude shed 19 cents to $41.74 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, used to price worldwide oils, fell 22 cents to $44.07 in London.
Standard Chartered PLC (STAN.LN) jumped 2.1%, while HSBC Holdings PLC (0820.HK) added 1%, and Prudential PLC gained 1.8%. The stock rose 88 cents, or 8.4 percent, to $11.32.
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The dollar was slightly higher against the yen at 101.30 JPY=, while the euro was steady at $1.1150 EUR=. The euro edged up to $1.1134 from $1.1128.
