European stocks, pound bounce into the weekend

Jun 18 2017 10:35

London - European stock markets rebounded on Friday from a sell-off the previous day, while the pound extended gains on growing expectations of hikes in British interest rates.

Equity traders have suffered a fraught week as the crisis engulfing Donald Trump picks up pace, technology firms tumbled from recent highs and energy plays were hammered by plunging oil prices.

But they shifted back into buying mode on Friday, with Frankfurt, London and Paris pushing higher ahead of the weekend.

European investor sentiment was also buoyed after eurozone ministers struck a long-delayed deal with Greece on Thursday to unlock badly-needed rescue cash.

Meanwhile, Tokyo was also boosted by a slumping yen, which makes its exports cheaper for foreign customers.

The dollar rallied around two percent against the yen from lows touched before the US Federal Reserve on Wednesday lifted borrowing costs and indicated further tightening of monetary policy.

The central bank also outlined plans to suck cash out of the financial system by scaling back the bonds on its balance sheet.

With the yen weakening after the Bank of Japan refused to alter its accommodative monetary policy, stocks rallied and Tokyo's Nikkei index closed up 0.6 percent.

However, governor Haruhiko Kuroda is facing pressure to provide some guidance on its future plans as the economy improves and concerns grow about a widening gap between US and Japanese interest rates.

End of gravy train

Hong Kong added 0.2% a day after tumbling more than one percent, while Sydney and Singapore each put on 0.2%. Wellington and Taipei also saw healthy gains but Shanghai ended off 0.3%. Seoul was narrowly higher.

The pound extended gains after surging on Thursday in response to the surprise news that three out of the Bank of England's eight policy board members had voted for a rate hike as inflation continues to rise on the back of increasing import costs.

Sterling had fallen below $1.270 before the decision but bounced to as high as $1.2795 afterwards before edging back slightly.

However, it remains pressured by political uncertainty following last week's election that saw British Prime Minister Theresa May's ruling Conservative Party lose its majority.

Analysts said the post-financial crisis era of ultra-low rates and easy money was coming to an end as central banks around the world began to tighten the belt.

"The markets continue to digest the latest signals from the Federal Reserve Board who are now actively discussing how and when to pare back the balance sheet," said Stephen Innes, senior trader at OANDA, in a note.

"But just as significantly the investors are now coming to grips with the notion that (the) perpetual global central bank gravy train may be coming to an end."

US stocks dipped at the opening bell on Friday, with the Dow slipping 0.06 percent.

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