Stocks back near record highs on dovish ECB bets
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[July 22, 2021] By
Huw Jones
LONDON (Reuters) - Stocks returned to near
record highs in Europe on Thursday as investors bet on the European
Central Bank keeping its stimulus taps full open as long as COVID
remains a threat to growth.
A revived appetite for riskier assets came as worries that the Delta
variant of COVID-19 would seriously crimp economic recovery, eased.
The STOXX index of 600 leading European shares was up 0.6 percent at
456.53 points, back within striking distance of its lifetime high of
461.38 points reached last week.
Among the standouts, shares in consumer goods giant Unilever sank 4.4%
after it warned that surging commodity costs would squeeze its full-year
operating margin, overshadowing solid second-quarter sales growth.
Investor focus was firmly on the ECB in Frankfurt.
"The ECB is going to do precisely what the market expects," said Michael
Hewson, chief markets analyst at CMC Markets.
"In light of recent events in western Europe, the flooding, the last
thing that Europe needs at the moment is a tightening of monetary
policy," Hewson said in reference to last week's devastating floods in
Germany and Belgium that killed over 180 people.
Italian borrowing costs sank to their lowest in over three months ahead
of the ECB meeting, whose outcome is due at 1145 GMT, followed by a news
conference with its president Christine Lagarde at 1230 GMT.
Investors will scrutinise her guidance on inflation as the debate over
when huge pandemic-era stimulus should be reined back continues among
central bankers in Europe and the United States.
"The markets are caught in a bit of pincer movement between concerns
about higher inflation and lower growth and that will continue," CMC's
Hewson said.
Graphic: Inflation at ECB target -
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gfx/mkt/oakvebqagpr/CPI0101.PNG
ASIA SHARES SHINE
Asia's stock markets headed for their best day in two months on Thursday
though growth-sensitive currencies struggled to rally, pointing to
nagging doubts about the recovery.
MSCI's broadest index of Asia-Pacific shares outside Japan was last up
1.2%, its largest daily jump since late May, with markets green from
Seoul to Sydney.
Japanese markets were closed for a holiday.
Asia's positive mood followed a rebound on Wall Street.
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Signage is seen outside the entrance of the London Stock Exchange in
London, Britain. Aug 23, 2018. REUTERS/Peter Nicholls
S&P 500 futures were only slightly firmer, suggesting the U.S. rally's momentum
is fading.
There was no obvious catalyst for the recent rebound in stocks, or for the
drawdown on Friday and Monday, though a study on Wednesday showed both Pfizer
and AstraZeneca vaccines were effective against the Delta coronavirus variant.
"Every now and then investors look for reasons to take some profits off and
that's what we saw," said Jun Bei Liu, portfolio manager at Tribeca Investment
Partners in Sydney, adding that compared with 12 months ago, there are now quite
a few viable vaccines.
Graphic: Dollar strength -
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gfx/mkt/akpezgzjlvr/Pasted%20image%201626897217870.png
Hong Kong led Asia's gains with banks HSBC and Standard Chartered off
multi-month lows to lift the Hang Seng by 1.7%. Heavily-indebted Chinese
property developer Evergrande jumped about 8% after it said it had resolved
legal disputes with a lender.
The Australian and New Zealand dollars were weighed down by lockdowns. [AUD/][FRX/]
The dollar index sat at 92.758, off Wednesday's three-month peak of 93.194 and
the euro was steady just above recent lows at $1.1793. The safe-haven yen nursed
small losses across the board.
Rates markets idled in Asia, with trade thinned by Tokyo's holiday, leaving the
yield on benchmark 10-year U.S. Treasuries at 1.2716%. [US/]
Oil prices slipped after an unexpected rise in U.S. crude oil inventories,
though hanging on to most of Wednesday's sharp price rise, its biggest one-day
gain in three months. Brent crude futures were last 0.2% softer at $72.08 a
barrel, but had gained more than 4% on Wednesday. [O/R]
Gold eased 0.2% to $1,799 an ounce as appetite for safer assets weakened.
Cryptocurrencies were firm after bouncing from lows when Tesla boss Elon Musk
said the carmaker would likely restart accepting bitcoin payments after due
diligence on its energy use.
Bitcoin was little changed at $32,135.
(Additional reporting by Tom Westbrook; Editing by Ana Nicolaci da Costa, Sam
Holmes and Raissa Kasolowsky)
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