European equities pushed higher yesterday as traders brimmed with confidence ahead of key meetings by European and US central bankers and as concerns over Italy’s political future eased.
The buying spree was led by Frankfurt, where the main stock index hit a 2016 high, with London, Paris and Milan not far behind.
The European Central Bank is widely expected to prolong massive monetary stimulus today as the election of Donald Trump and fears for heavyweight member Italy have rattled the eurozone.
“It is likely that the ECB will deliver on the markets’ expectations, and extend its QE (stimulus) programme,” said City Index research director Kathleen Brooks.
“The calm market reaction to Italy’s NO vote in last weekend’s referendum should ease the pressure on the ECB,” she said.
Meanwhile, London’s FTSE 100 gained 1.8% at 6,902.23 points, Frankfurt’s DAX 30 rose 2% at 10,986.69, in Paris CAC 40 jumped 1.4% at 4,694.72 and Milan’s FTSE MIB rose 2.1% to 18,131 at close yesterday.
There is a growing consensus that the Federal Reserve will not get in the way of any big spending by the Trump administration, instead keeping monetary policy accommodating, analysts said.
Such expectations helped the euro and the yen claw back ground against the dollar yesterday.
Shares in crisis-hit Italian bank BMPS shot higher by nearly 11% on reports that Italy’s government is preparing a plan of action should the lender’s own rescue efforts fail.
Other Italian banking stocks were also sharply up, as were many other financials across Europe.
“The Italian banking sector got some relief, and this underpinned the European sector,” Frederic Rozier, an asset manager at Meeschaert Gestion Privee in Paris, told AFP.
Italians’ rejection of constitutional reforms in Sunday’s referendum have not roiled markets as some observers had feared.
Italian Prime Minister Matteo Renzi announced he would resign later yesterday after parliamentary approval of Italy’s 2017 budget was completed.
Wall Street stocks were a touch higher approaching midsession, consolidating a post-election rally sparked by expectations of pro-growth polices from Washington.
Also in view for traders is the Federal Reserve’s policy meeting next week, with the US central bank widely tipped to lift interest rates.
Its statement will also be pored over for clues about future policy in light of an expected surge in government spending by Trump which would likely fan inflation, which is however, subdued for now, analysts noted.
Traders work at the Frankfurt Stock Exchange. The DAX 30 rose 2% to 10,986.69 yesterday.
