Upbeat global economic data andgrowing signs that inflation on both sides of the Atlantic is accelerating fuelled a second day of 2017 gains across world stock markets yesterday, and lifted the euro and oil prices. A batch of reports from Europe showed that French consumer confidence hit a nine-year high, business activity across then euro zone rose at the fastest pace in more than five years and inflation in the eurozone is its highest in over three years. This followed similarly upbeat reports this week on U.S., British, Chinese and Japanese business activity and helped steer investors towards riskier assets that benefit from higher interest rates - such as equities - and away from lower-yielding assets, including bonds. "Over the month, confidence increased in the manufacturing sector and stabilised in services, amid solid new orders and businesses, strong optimism and elevated backlog of works," said Apolline Menut, economist at Barclays.
At midsession in Europe yesterday, Europe's index of leading 300 shares was flat at 1,445 points, supported by a 0.5-percent rise in financials but capped by the strength of the single currency. One of the biggest movers on major European bourses was UK retailer Next. Its shares fell as much as 14 percent after a profit warning. The stock has lost nearly 40 percent over the past year.
U.S. futures pointed to a higher opening of up to 0.2 percent on Wall Street, priming the Dow Jones for another test of the 20,000-point mark. The potential for further U.S. rate hikes this year ensured profit-taking on the dollar's run on Tuesday was limited to 0.2 percent against a basket of currencies. The dollar's strength in Asian trading helped Japan's exporter-heavy stock market rally toward its biggest daily increase for almost two months.
The euro rose 0.3 percent to $1.0435, and the dollar gave up earlier gains against the yen to trade little changed at 117.75 yen. The continued grind higher in euro zone inflation is lifting inflation expectations closer to the European Central Bank's target of just below 2 percent. This offers some welcome relief to ECB policymakers who for years have struggled to lift growth and inflation. The focus for investors now turns to the minutes of the Federal Reserve's policy meeting last month, when it raised rates.
