Global stocks, sterling
rally on stimulus hopes
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[July 12, 2016]
By Vikram Subhedar
LONDON (Reuters) - European shares were on
track for a fourth straight day of gains and the yen broke below its
post-Brexit low on Tuesday as easing political tensions in Britain,
stimulus hopes and a record high close for U.S. stocks boosted risk
appetite.
S&P 500 index futures, up 0.5 percent, pointed to further gains on Wall
Street on Tuesday.
Europe's STOXX 600 rose 1 percent, helped by strong gains in Daimler and
Unicredit, while sterling jumped 1.3 percent against the dollar, pulling
further away from a 31-year low hit last week.
In Britain, interior minister Theresa May was set to become prime
minister on Wednesday, offering some relief from the political
uncertainty that has dogged the market since the country voted to leave
the European Union last month. [GBP/]
Second-quarter earnings season, for which investor expectations are low,
got off to a bright start in the U.S. with aluminum producer Alcoa <AA.N>
beating estimates overnight.
In Europe, shares in Daimler jumped 5 percent after the German automaker
posted encouraging results and reiterated its full-year outlook,
allaying some concerns about the impact of Brexit.
Italian banks, a focus of investor concerns in Europe, got a boost on
Tuesday with Unicredit jumping nearly 7 percent after the bank took
steps to strengthen its capital position by selling a stake an online
broker.
Italian government borrowing costs edged lower on Tuesday, narrowing the
gap with benchmark Germany, as Rome moved closer to a deal to safeguard
the country's struggling banks.
"If there is some way in which Italy's banks can offload their inventory
of bad loans then that would be seen as very positive for the economy
and, in turn, allow government spreads to tighten further," Mizuho
strategist Peter Chatwell said.
RISK APPETITE RETURNS
Earlier, Asian shares extended gains, partly on expectations of more
policy stimulus, particularly in Japan.
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Japanese Prime Minister Shinzo Abe signaled a fresh round of fiscal stimulus
after a victory for his ruling coalition in upper house elections, sending the
yen lower and stocks higher.
Traders in London said former U.S. Federal Reserve chief Ben Bernanke's presence
in Tokyo had boosted expectations of more monetary easing too. The BOJ is still
far from achieving its inflation target despite adopting negative rates earlier
this year in addition to its asset buying program.
"The market is now priced for more than 10 trillion yen (of extra stimulus), but
it will be more about the fiscal-monetary coordination that is driving markets,"
said Hans Redeker, head of currency strategy at Morgan Stanley, suggesting that
figure would rise in light of Abe's comments.
The dollar rose 1 percent to 103.92 yen <JPY=>, its highest level since June 24,
when the British referendum result roiled global markets. The euro jumped more
than 1 percent to 115 yen.
In commodities, oil prices recovered from two-month lows as a brief halt in
Iraqi crude loadings threatened to tighten supplies. [O/R]
Brent crude was at $47.72 per barrel, up more than 3 percent from its last
close. U.S. West Texas Intermediate crude was up $1.30 at $46.05 a barrel.
Prices of basic metals including zinc, aluminum and nickel got a boost after
Goldman Sachs lifted its forecasts on expectations of tighter supplies in the
second half of the year.
(Reporting by Vikram Subhedar, additional reporting by Anirban Nag and John
Geddie; editing by John Stonestreet)
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