On 15 February, 2016 – European markets rose on hopes for further stimulus by its central bank
US markets were closed for President’s Day. Asian markets were broadly higher.
Europe
Europe’s benchmark stock index rallied the most in three weeks on Monday, as investors were optimistic about further stimulus measures from the European Central Bank (ECB). The Stoxx Europe 600 index jumped 3%, while the UK’s FTSE 100 rose 2% for a second straight session of gains.
Banking shares were among the biggest gainers. Unipol Gruppo Finanziario, Banco Popolare, Banca Popolare di Milano, HSBC and Credit Suisse advanced. Conversely, precious metals miners topped the list of decliners, tracking a slide in gold and silver prices. Shares in Fresnillo and Randgold Resources fell. Elsewhere, Electricite de France declined on news of a slump in its net profits.
Trading volume was lighter than usual, as normal U.S. trading is closed for the President’s Day holiday.
European Central Bank President Mario Draghi said that the ECB “will not hesitate to act” at its March policy meeting if the market turmoil threatens the economic outlook. He also rebuffed earlier reports that the central bank is talking with the Italian government about buying bad loans from the country’s banks as part of its asset-purchase scheme. Italian banks rallied on the report and ended the session firmly higher.
Asia Pacific
Shares in Japan surged on Monday to post their biggest gain since September 2015, as investors bought up recently battered financial stocks and the Japanese yen continued to ease from its strongest levels against the US dollar in more than a year. The Nikkei Stock Average rose 7.2%, reversing the bulk of its 11% loss last week, which had been the benchmark’s biggest weekly percentage drop since October 2008.
The Japanese yen weakened 0.7% against the US dollar to trade at ¥113.94. A weaker local currency helps the competitiveness of Japanese exporters, although this trend has reversed recently, with the yen reaching as high as ¥110.98 against the US dollar last week. On the economic front, Japan reported that its GDP contracted in the fourth quarter.
Hong Kong’s Hang Seng Index rose 3.3%, partly due to a strong rise in HSBC Holdings, which has a 10% weighting in the index. Australia’s S&P ASX 200 gained 1.6% and South Korea’s Kospi was up 1.5%.
Conversely, Chinese shares slipped slightly on Monday. The Shanghai Composite Index ended down 0.6%. Investor sentiment appeared to be positive despite a weak set of economic data releases on Monday. Chinese exports fell 6.6% in yuan terms in January from the previous year, compared to a 2.3% increase in December. Imports fell 14.4% in January from a year ago.
Global Stock Markets
Please remember, the value of investments and the income from them can do down as well as up. Funds that invest in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can be more volatile than other overseas markets. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.
Looking forward*
The following indicators will be released this week…
Europe
February 16
UK
Inflation rate (monthly and yearly) (January)
Retail Price Index (monthly and yearly) (January)
EU
ZEW Economic Sentiment Index (February)
Asia/Pacific
February 16
Australia
Minutes from Reserve Bank of Australia meeting
Americas
February 16
United States
NAHB Housing Market Index (February)
*Note — all releases are listed in local time.