Market update: In focus today: gilts and currencies; especially sterling and the euro

Wall Street stocks enjoyed a rally on Friday seemingly buoyed by reassurances from three key Federal Reserve officials on policy risk, a much improved German business sentiment, and strong earnings from Hewlett-Packard (a Dow Jones component). Both the Dow Jones and S&P 500 indices gained 0.9% on the day; however, the latter posted its first weekly decline this year. Among the S&P 500 sectors technology, financials and basic materials outperformed.

Asian shares were broadly firmer overnight although gains were capped as a private survey showed that Chinese manufacturing activity fell back from two-year highs this month. In Japan, the Nikkei 225 rose 2.4% as clarity around the next Bank of Japan governor – an advocate of aggressive monetary easing – weakened the yen further. The mood is positive in Europe this morning; the FTSE Eurofirst 300 was up 1.2% at the time of writing while the FTSE 100 rose 0.7%. Growth-sensitive assets are advancing; commodities are mostly higher with copper rising from an eight-week low, and safe haven plays are in retreat. Currencies are the main focus of the markets today with the yen weakening further, sterling falling to 16-month lows after the UK’s credit rating downgrade, and the single currency awaiting the outcome of the Italian elections today.