Markets will be watching meetings of the European Central Bank and the Bank of England tonight for further evidence of support, especially the ECB which is said to be poised to open its wallet further and expand its easing program.
Markets in Asia rose to a series of new highs yesterday, while European markets were within sight of post GFC highs at the close early this morning.
In Europe, the FTSE Eurofirst 300 index ended at 1,399.97. the Financial Times says that if the Eurofirst finishes above 1,401.5 it will register its best close since January 2008.
Gold was up to $US1,211 an ounce , reversing yesterday’s weakness and up around $US11 an ounce.
US oil prices rose 0.7% to $US67.40 a barrel, also reversing the weakness seen yesterday.
US markets ended higher and our market is looking at a small rise this morning.
Sentiment was lifted also by an upbeat performance in Asia, where Shanghai hit a fresh three-year high and Tokyo registered a new seven-year peak after the yen stumbled to its weakest since August 2007.
Shanghai rose 0.6% to 2,779.53 (after jumping 2% in early trading), while Tokyo closed 0.3% higher at 17,720.43 after being up 1% in early trading.
The Shanghai market has risen in 10 of the past 11 sessions for a cumulative gain of just under 15%.
The strong performance of the Shanghai market has echoes of the way the German and French markets have rebounded strongly this year (with interest rates falling as well), despite weak growth. It’s the expectation the ECB will do more to stimulate demand which has underlain this strength.
Helping the market rally higher has been the stock connect linking the Hong kong and Shanghai markets which has seen billions of dollars of new foreign investment injected straight into the Shanghai market.
The looser monetary policy, including the surprise rate cut late last month, and expectations (more hope) that the central government will react to the flow of weaker economic data and either cut rates again or add more stimulus to support weakening growth.
Helping was a solid survey of China’s services sector which was much more supportive of the economy and sentiment than the two monthly reports on manufacturing earlier in the week.
The Japanese market’s rising in the wake of the expansion of the Bank of Japan’s stimulus at the end of October, and the feeling the economy isn’t in recession. but the big driver is the weakening yen, now at a seven year low to the greenback – around 119.40.
The contrast with the Australian economy and market is telling. Our market was up 0.8% at 5,321.8. The dollar’s fall took it under 84 US cents once again, a new four year low of 83.89, before moving back over 84 cents.
Our dollar remained a touch over 84 US cents this morning in Asia and is looking to go back under during the day as the flow of gloomy local news hits sentiment.
The benchmark ASX 200 Index and the All Ordinaries Index each lifted 0.8% yesterday to 5321.8 points and 5301.2 points respectively.
