Europe’s stock markets rebounded yesterday on bargain-hunting and the euro slid as dealers dwelled once more on the European Central Bank’s interest rate outlook. Meanwhile, US open stocks opened higher as data on second quarter growth beat expectations.
In afternoon trading Frankfurt stocks won 0.3 per cent and Paris added 0.5 per cent, while London rose 0.6 per cent in value.
“Stocks in Europe are a little higher today in the wake of the major sell-off yesterday,” said CMC Markets analyst David Madden yesterday.
“Ahead of the ECB meeting, traders were expecting a dovish update, and when a mixed report was released, it triggered a wave of selling, and today we are seeing some bargain hunting.”
The European single currency had briefly sunk on Thursday to $1.1102 – the lowest level since May 2017 – after the ECB signalled it could undertake new stimulus measures and cut rates to boost flagging growth and inflation in Europe.
But it then snapped higher after ECB President Mario Draghi left some traders feeling disappointed by the lack of any immediate action.
“The killer blow came from Mario Draghi on Thursday who wasn’t his usual dovish self – or more accurately, (he) failed to live up to the high level of expectation that the market has set,” said Oanda analyst Craig Erlam.
“I fear this is going to be a recurring theme as central banks try to appease markets while at the same time trying not to be pushed into easing at a faster rate than they are comfortable with.”
The euro resumed sliding in Friday trade, while it stayed considerably above $1.1102.
Wall Street shrugged off data that showed the US economy slowed sharply in the second quarter, with Google parent Alphabet, Starbucks and Intel posting good earnings reports after trading ended on Thursday.
Data showed the US economy growing at an annual rate of 2.1 per cent, compared to the 3.1 per cent it grew at in the first quarter. Moreover 2018 GDP growth was revised down to 2.5 per cent.
But the second quarter growth was higher than forecast by many economists, and Briefing.com analyst Patrick O’Hare pointed to strong consumer spending, with personal consumption expenditures rising by 4.3 per cent.
“The key takeaway from the report is that it revealed some impressive strength in the U.S. consumer,” he said, adding this type of data could lead one member of the US Federal Reserve to dissent on cutting interest rates when it meets next week.
“That point notwithstanding, it won’t deter the Fed from cutting the target range for the fed funds rate by 25 basis points, but it may very well have taken the prospect of a 50-basis points cut off the table,” said O’Hare.
The Dow rose 0.1 per cent at the opening bell, with the broader S&P 500 and tech-heavy NASDAQ indices both posting bigger gains.