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US stocks rise as ECB anxiety roils European stocks

Oct 06 2016 07:31

New York - US stocks rose on Wednesday on news of an unexpected pickup in services sector activity, but European bourses retreated on concerns the ECB will soon move to reel in stimulus measures.

In the US, banking shares were especially strong as investors viewed a strong Institute for Supply Management report as more evidence the Federal Reserve will hike interest rates this year.

The ISM's purchasing managers index for the service sector, the key engine of the American economy, jumped to 57.1, the highest level in nearly a year, after slumping to 51.4 in August.

"Not only was it an increase, it was a number that blew the doors off of expectations," said Jack Ablin, chief investment officer of BMO Private Bank.

US stocks were also boosted by a surge in petroleum-linked shares as US oil prices advanced to near $50 a barrel on a report showing lower US oil inventories.

The S&P 500 finished up 0.4%.

The story was much different in Europe, where markets continued to grapple with speculation the European Central Bank will probably taper its bond purchases before it ends its quantitative easing stimulus.

The impetus for large moves in the European bond market on Tuesday was a Bloomberg News report that was rebutted Wednesday by the ECB.

"Governing Council has not discussed these topics, as (ECB president Mario) Draghi said at last press conference and during testimony at European parliament," tweeted ECB media relations chief Michael Steen.

Still, bourses in Frankfurt and Paris both lost 0.3 percent.

Eurozone bond prices also fell again, reflecting expectations of fewer ECB bond purchases, with the yield on the German 10-year benchmark bond rising by around five basis points.

"European equity markets are on the back foot as concerns grow that central banks are going to pare back accommodative policy," said Rebecca O'Keeffe, head of investment at stockbroker Interactive Investor.

Pound rallies a bit

Japan's Nikkei climbed 0.5%, with the weaker yen boosting export-oriented stocks.

The British pound rallied from Tuesday's 31-year low against the dollar, rising against both the greenback and the euro.

Yamaha Motor jumped 4.3% while Honda gained 2.9%, on reports the two motorcycle giants are in talks over joining up their scooter divisions. The companies confirmed the report after the market closed.

Twitter jumped 5.7% after the Wall Street Journal reported the social media company is expected to receive takeover bids this week. Possible suitors include Google, Disney and Salesforce.com, which has publicly expressed interest in Twitter and which slumped 5.4%.

BMO Capital predicted Salesforce would be forced to issue a "meaningful" amount of stock to finance a Twitter bid, said a note that was headlined, "Bad Idea."


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