World stock market rally runs out of steam
AFP
AFP, LONDON: A global stocks rally ran out of steam in Europe yesterday, as fading prospects of another US interest rate hike sent the euro surging, weighing on eurozone exporters.
The Frankfurt, London and Paris stock markets had opened brightly, following a largely upbeat session in Asia and overnight on Wall Street, but hit reverse gear as the morning progressed.
The British market also pulled lower in cautious deals before the latest monetary policy decision from the Bank of England, which is set to keep its key rate on hold at a record low 0.50 percent.
At about 1035 GMT, the European single currency soared to a five-week high at $1.1342, after the Fed scaled back plans to hike rates this year and left borrowing costs unchanged.
European markets opened strongly on Thursday... after the Fed kept rates on hold, but worry over strength in the euro meant gains did not last long, said analyst Jasper Lawler at traders CMC Markets.
The stronger euro weighs on the share prices of eurozone exporters because it makes their goods more expensive for buyers using weaker currencies, which in turn dents demand.
The rapid appreciation of the euro has the potential to hurt eurozone exporters which have benefited from its weakness, said Oanda analyst Craig Erlam.
Europes main stock markets also beat a retreat on Thursday as investors took the opportunity to take profits following recent bumper gains.
Profit-taking is pushing markets lower and in addition many traders are of the opinion that they will be able to buy stocks cheaper in the not so distant future, noted trader Markus Huber at City of London Markets.
Many fund traders loaded up heavily on stocks in anticipation of these major central bank meetings and now have begun unloading by cashing in on some of the profits, he told AFP.
The biggest faller in Frankfurt was German airline Lufthansa, whose share price slumped more than five percent despite news of soaring 2015 profits.
Asian equities moved sharply higher on Thursday as Fed chief Janet Yellen lowered expectations for US interest rate hikes this year. In a statement following the Feds latest policy meeting, Yellen cited concerns about the impact on the US economy of recent turmoil in global markets, weakness in China and Europe, and the plunge in crude prices.
Her comments came after the central bank cut its outlook for US growth for this year and painted a picture of the economy that was less upbeat than many had expected.
Crucially it forecast a slower pace of interest rate rises than foreseen in December, when it announced its first hike in almost a decade.
Yellen said policymakers had opted for a slightly more accommodative path given soft US business investment and weak exports in recent months.
The prospect of rates staying at ultra-low levels for some time boosted US shares, gains that extended into Asian trade.
Huber added that the Fed had assured markets that ... rates wont go up any time soon, which provides certainty for investors.
