Factory growth in the euro area accelerated amid a continued decline in unemployment, extending a tepid recovery that may require more stimulus from the European Central Bank (ECB). Morgan Stanley rose 71 cents, or 2 percent, to $35.01 and Goldman Sachs rose $1.46, or 0.8 percent, to $191.48. The current stimulus program based on bond purchases had run for eight of its planned 19 months, but “had so far not been able to deliver a noticeable impact on its final target, i.e. moving inflation decisively to a higher path”, the account said.
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“Despite positive revisions to both October readings the eurozone inflation picture is not improving, and this provides [ECB President] Mario Draghi with further basis for easing when he takes the stand tomorrow”, Joshua Mahony, market analyst at IG, said in a note, referring to the upcoming ECB policy meeting.
Early this year, Frankfurt’s DAX and the CAC-40 in Paris were already in steep climbs toward new highs in January, when the bank announced its ambitious bond-buying stimulus program. Global equities have been buoyed by easy-money policies from central banks over the past several years.
The increase reported Wednesday by the European Union’s statistics agency was below market expectations for a modest uptick to 0.2 per cent.
Speculation about a deeper cut into negative territory has been fed by experience in Switzerland, Denmark and Sweden, which have negative rates and have seen fewer unintended consequences than some had feared.
The strategy also weakens the home currency, helping to bolster consumer spending and inflation in domestic markets, while helping to make imported goods pricier and less attractive. In contrast, the U.S. Federal Reserve is expected to raise interest rates later in the month. Shanghai was 0.1 percent lower after surging more than one percent at one point.
“That requires the USA economy to shrug off the start of the tightening cycle, and the market then to become more comfortable with the prospect of a longer-lasting uptrend in US rates”.
BONDS, CURRENCIES: U.S. government bond prices fell noticeably after Yellen’s comments. The common currency traded above $.10600, pulling back from a 7-1/2-month low of $1.0557.
The euro was last up 0.5 per cent on the day at $1.0612 while the dollar index, which measures the greenback against six major peers was 0.2 per cent lower yesterday at 100.02.
Draghi on November 20 said the bank will “do what we must” to lift inflation as quickly as possible.
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The Standard & Poor’s 500 index gained 22 points, or 1.1 per cent, to 2,102. Weak demand for New Zealand’s main export has caused ripples throughout the economy and caused many to speculate that the Reserve Bank of New Zealand will need to cut interest rates in order to help stimulate the economy.
