A man walks past the London Stock Exchange in the City of London. The benchmark FTSE 100 index finished up 1.10% to 6,338.67 points yesterday compared with Wednesday’s close.
AFP/London
Global equities moved ahead yesterday as another raft of weak US economic data reinforced expectations that the Federal Reserve will likely delay an interest rate hike.
In Europe meanwhile, a senior policymaker at the European Central Bank said inflation was “clearly” missing its target, raising market speculation that the central bank could increase stimulus measures in the eurozone.
London’s benchmark FTSE 100 index finished up 1.10% to 6,338.67 points compared with Wednesday’s close.
Frankfurt’s DAX 30 climbed 1.50% to 10,064.80 points while the Paris CAC 40 rose 1.44% to 4,675.29.
European and Asian stocks rebounded after recent losses sparked by concerns over the potential impact of China’s economic slowdown.
“The weak data seen from the US, notably the disappointing retail sales, has actually increased (market) certainty because a Federal Reserve rate hike this year now seems highly unlikely,” said analyst Jasper Lawler at traders CMC Markets.
US retail sales rose by half as much as expected in September, while August was revised down, official data showed Wednesday.
In addition, the Fed’s closely-watched Beige Book report said while expansion continued modestly, the stronger dollar in recent months was “restraining manufacturing activity as well as tourism spending”.
The news comes after a below-par jobs report at the start of the month, adding to a sense that the world’s biggest economy is stuttering, giving the Fed more reason to hold off a rate rise.
Also yesterday, ECB board member Ewald Nowotny said inflation was missing the bank’s target, fed by sharp falls in commodity and oil prices.
“One has to say that these are elements the central bank cannot influence, but also core inflation rates are clearly below our target,” the Austrian economist said, quoted by the Bloomberg news agency.
The outlook is fanning market speculation that the ECB may strengthen its bond-buying programme, aimed at pushing eurozone inflation back up to levels that are more conducive to healthy economic growth, or extend the so-called quantitative easing beyond an original September 2016 time-frame.
“Nowotny’s comments differ from the recent ‘wait and see’ mantra coming from several ECB policymakers, including President Mario Draghi, regarding the need for more stimulative action,” IHS Global Insight chief UK and Europe economist Howard Archer said in a report.
In the US, the Fed has held its key rate near zero since December 2008 in order to stimulate economic growth.
The curve of American interest rates is vital for global markets because the US is the world’s biggest economy.
“No rate hike keeps the liquidity tap on,” noted VTB Capital economist Neil MacKinnon.
US stocks rose slightly higher, with the Dow Jones Industrial Average up 0.18% at 16,955.48 near mid-day in New York.
The broad-based S&P 500 rose 0.35% to 2,001.21, while the tech-rich Nasdaq Composite Index added 0.55% to stand at 4,809.11.
In foreign exchange, the European single currency dipped to $1.1394 from $1.1469 late in New York on Wednesday.
On the corporate front, mining stocks were mixed after posting early gains on a recovery in commodity prices.
Shares in troubled resources giant Glencore tumbled 1.88% to 117.75 pence, whereas fellow miner Antofagasta added 1.03% to close at 586.50 pence.
The biggest loser was Britain’s luxury fashion group Burberry, whose share price collapsed by 8.25% after admitting that demand had been hit by China’s slowdown.
