This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

European, Asian Stock Markets Rise (Update 2)

By Toby Sterling

AMSTERDAM -- World stocks shrugged off worries over political turmoil in Egypt and rallied strongly Thursday on optimism that easy monetary policy from central banks in Europe is set to continue for some time to come. U.S. markets were closed for Independence Day.

The biggest gains were in Britain, where the Bank of England surprised markets after its first monetary policy meeting held under new governor Mark Carney. It said afterward that expectations it would raise rates in coming months were unwarranted, despite the improving economic backdrop.

Meanwhile, the European Central Bank kept rates at record low rates in light of the eurozone's ongoing recession, with President Mario Draghi for the first time saying they will remain there "for an exended period of time."

Stocks surged after each statement.

Britain's FTSE 100 index jumped 3.1% to close at 6,421.67 while Germany's DAX rose 2.1% to 7,994.31. France's CAC 40 gained 2.9% to 3,809.31.

The central bank statements contributed to strong declines in the euro and British pound against the dollar. Looser monetary policies tend to weaken a currency as low interest rates mean lower returns on investments and more attractive opportunities can be found elsewhere. The euro fell 0.7% to $1.2916, while the British pound fell 1.4% to $1.5066.

Financial shares were among the strongest gainers, with Royal Bank of Scotland PLC stock rising 5.1%, Barclays PLC up 4.7% and HSBC PLC up 4.6%.

"Global markets stormed ahead today as ... Draghi confirmed that interest rates will be kept at current record lows or even further lowered in order to inject more liquidity into struggling eurozone nations," said Spreadex trader Shavaz Dhalla in a note on markets.

However, "there is still the concern that volumes are thin today owing to the U.S market being closed."

Earlier in Asia, Hong Kong's Hang Seng index was the strongest gainer, rising 1.6% to 20,468.67. China's Shanghai Composite rose 0.6% to 2,006.10.

Tokyo's Nikkei 225 bucked the trend, slipping 0.3% to 14,018.93, despite remarks from Bank of Japan governor Haruhiko Kuroda that the country's economy is headed for recovery.

The dollar gained 0.2% against the yen, passing the 100-yen mark to 100.06 yen.

Mike McCudden, head of derivatives at Interactive Investor, noted that while physical exchanges are closed in the U.S., futures are still trading, and they indicate Wednesday's rally on the back of economic data has continued, with Dow Jones Industrial Index futures now trading above 15,000. The index closed at 14,988.50 Wednesday.

"Whether this can be sustained will clearly be reflected by what's happening on a global basis," he said in a note on markets. "The situation in Egypt remains hugely sensitive, whilst resurgent eurozone woes could knock sentiment."

Investors around the world were also keeping a close watch on the oil price, which has passed $100 per barrel due to Wednesday's events in the Middle East: Egypt's military overthrew Mohammed Morsi, the country's first democratically elected president, after he defied calls to resign despite the demands of millions of protesters.

Egypt is not an oil producer but its control of the Suez canal -- one of the world's busiest shipping lanes, which links the Mediterranean with the Red Sea -- gives it a crucial role in maintaining global energy supplies. High energy costs act as a drag on economic growth, but oil has eased somewhat from its Wednesday highs and was down 25 cents to $100.99.

The Bank of England and ECB statements also led to lower government bond yields in Southern Europe, where fears have been brewing that a crisis in Portugal's governing coalition could bring Europe's debt crisis back to a boil.

"These actions should help limit increases in bond yields in the U.K. and Europe, even as Treasury yields grind higher amid Fed tapering speculation," said BMO Economist Benjamin Reitzes.

Over the past few weeks, markets have sputtered amid speculation that the U.S. Federal Reserve might taper off its policy of buying $85 billion in bonds every month to keep interest rates low and encourage spending.

But on Wednesday, unemployment and jobs data out of the U.S. were just right for stocks, analysts said: good enough to restore confidence that the U.S. economic recovery is continuing, but not so good that the Fed is likely to pull back on stimulus.

"We have had a period of extreme volatility, and now we have some settling going on," said Lorraine Tan, director at Standard & Poor's equity research in Singapore. "I think there's a realization that the reaction may have been overdone."

Kay Johnson in Bangkok and Pan Pylas in London contributed to this report.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,118.12 +143.81 0.85%
S&P 500 0.00 -2.75 -0.14%
NASDAQ 4,542.5510 -6.6750 -0.15%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs