LDN - Business

Stocks rise, euro holds gains before Draghi's farewell

[October 24, 2019] By Marc Jones

LONDON (Reuters) - Europe's traders were sending European Central Bank chief Mario Draghi off in style on Thursday, raising the region's stocks to their highest in more than a year and nudging the euro towards its best month since January 2018.

Update earnings from Microsoft and Mercedes maker Daimler, along with a ceasefire in northern Syria, lifted the mood. Trade and Brexit uncertainties and some below-par German data prevented even bigger gains.

The list of landmarks was still impressive. The pan-European Stoxx 600 rose 0.3% to its highest since May 2018. Germany's DAX wasn't far behind and the euro was at $1.1140, consolidating its 2.1% October advance.

Gains in Asia had included a one-year high for Tokyo's Nikkei and saw MSCI All World index, which tracks nearly 50 countries, reach its highest since late July.

"Draghi is in a situation where bond yields are higher and the collapse we saw over the summer is reversing, the euro has steadied itself and everything is fine, except for the PMIs of course," said Societe Generale's Kit Juckes. "And he's handing over an empty monetary policy toolkit."

Euro zone bond yields were steady before Draghi's send-off.

The Swedish crown rose 0.7% after the country's central bank said it was still planning to raise interest rates in December. Its gains pulled the Norwegian crown higher as well, despite a relatively dovish message from the Norges Bank as it left rates unchanged.

Turkey's central bank was expected to slash its 16.5% rates by another 100 basis points, after U.S. President Donald Trump lifted sanctions on Turkey following a ceasefire in northern Syria.

ELECTRIC DREAMS

On Wall Street earlier, the Dow and the Nasdaq added 0.2% each and the S&P 500 gained 0.3%. Tesla shares jumped 21% in after-hours trading after the company reported an unexpected third-quarter profit.

Microsoft posted forecast-beating profit and revenue numbers after the closing bell, although the outlook was darkened by slower-than-expected take-up of its Azure cloud services.

Shares of Boeing Co and Caterpillar Inc ended about 1% higher each despite big earnings misses.

Alarming headlines since the first quarter of 2018 suggested poor Caterpillar earnings seemed to mean a recession was around the corner, RBC Capital Markets' chief economist Tom Porcelli said, but has never managed to arrive.

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A financial trader works at their desk at CMC Markets in the City of London, Britain, April 11, 2019. REUTERS/Peter Nicholls

"We have been down this road before with CAT," Porcelli said in a note titled "Still Waiting For Recession." "If you keep saying a recession is here, it is a mathematical certainty that at some point you will be right. Maybe try again after CAT's next quarterly earnings report."

So far, results from about 125 of the S&P 500 companies are out with analysts expecting earnings to have declined 2.9% year-over-year, according to IBES data from Refinitiv.

BREXIT BATTLE

Sterling paused at $1.2914 after rising 0.3% on Wednesday. After more than three years, Britain appears closer than ever to resolving its Brexit conundrum but still has hurdles to clear.

EU member states on Wednesday delayed a decision on whether to grant Britain a three-month Brexit extension. Prime Minister Boris Johnson said if the deadline is deferred to the end of January, he would call an election.

"The Brexit battle looks like it will drag on," economists at ANZ wrote in a note. "The UK government will not meet its current timetable of leaving the EU on 31 October, and an extension appears likely. In the meantime, Brexit uncertainty will keep weighing on UK business investment and activity."

The euro was flat at $1.1132. The Japanese yen was 0.1% higher at 108.6 per dollar and the Australian dollar was weaker at $0.6842.

The dollar index was lower at 97.452 against a basket of six major currencies, heading for its worst month since January 2018.

In commodity markets, U.S. crude fell 38 cents to $55.59 a barrel. Brent slipped 22 cents to $60.95.

Gold was treading water at $1,491.51 an ounce.

(Editing by Larry King)

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