| |
FOCUS-Eurostocks up sharply on lower rates prospects
Reuters Story - September 07, 1998 03:51
%GB %DE %FR %STX %FRX %US %ECI %MARKETS/ MNU.L BSY.L ENI.L DRSD.F V%REUTER P%RTR
(Updates prices)
By Leonard Santorelli
LONDON, Sept 7 (Reuters) - Major European bourses climbed sharply on Monday, buoyed by a global market rally following remarks by U.S. central bank chief Alan Greenspan which prompted a rethink on the outlook for U.S. interest rates. An overnight rally in Asian stocks and the hint that U.S. rates could be cut sooner than expected stiffened European markets confidence after weeks of nerves. London and Frankfurt climbed over two percent.
"There is obviously a great sense of relief that the bias for tightening rates in the U.S. has been removed," said Ian Williams, strategist at Panmure Gordon.
"But Greenspan was his usual cautious self and with Wall Street shut today (for Labor Day) I don't expect a whole lot of conviction behind this rally.
But in currency markets, the talk of lower U.S. interest rates had the opposite effect on the dollar, pushing it down to four months lows against the yen.
MARKET PRICES AT 1130 GMT MARK 1.7152/72 YEN 130.78/81 STERLING 1.6714/22 GOLD $288.45/288.85 +3.64 (pvs PM fix) BRENT $13.41 +0.10 FTSE 5288 +121.00 CAC 3,701.58 +10.83 X-DAX 4903.95 +38.98
The focus of interest switched to the possibility of U.S. interest rate cuts following Federal Reserve Chairman Greenspan's speech on Friday warning that the global turmoil might hurt the U.S. economy and suggesting he was as inclined to cut rates as to raise them.
"It's all about the dollar yen rate today, which is good news for all of us," said one trader. "We are looking at some very substantial rises around world stock markets but nobody has been fooled into thinking the turmoil is over."
Tokyo's Nikkei surged five percent, helped by rumblings from government sources that Finance Minister Kiichi Miyaza told Greenspan the Japanese market was nearing a turning point from where it would shoot forward.
Although the key European markets followed Asia's lead, the New York Stock Exchange will remain shut on Monday for Labor Day. S&P Globex futures, however, were trading sharply higher.
In London, the return of UK corporate activity also helped to boost confidence after football club Manchester United revealed it was in takeover talks with BSkyB .
The shares rose 56p or 35 percent amid newspaper speculation that leisure group Enic may launch a counter offer.
But trade overall was remained relatively slim as the continuing volatility in share prices and the U.S. markets absence pushed many investors to the sidelines.
And heavy falls in Latin American markets on Friday and the lack of a resolution on who Russia's new Prime Minister would be, helped to keep nerves on edge. Frankfurt put on an early sprint but fell back somewhat by midday. Dresdner Bank AG was among the leaders, up nearly four percent.
Dealers said the perceived implication that U.S. interest rates may fall was fuelling bank shares which had suffered a battering in recent weeks amid fears that stock market plunges and the Russian crisis was hurting their earnings.
Paris stocks were volatile. An opening gain of nearly two percent dwindled to 0.3 percent by lunch-time. Traders said the rebound fuelled by Asian market strength looked technical and there was still good cause for market nerves.
In currency markets, Greenspan's remarks were the dominant influence. The growing expectations the U.S. could be moving closer to cutting interest rates dealt a fresh blow to the already weak dollar.
Currency markets seized on his remarks that the U.S. Central Bank no longer viewed inflation as the main threat to the U.S. economy.
Analysts said Monday's rally in Asian stocks and concern about Latin America, the latest victim of panic in emerging markets, were other factors adding to the dollar's woes. |
|
