Stocks edge up as Fed outlook, China gains, trump oil slip

Rajalakshmi S | | Updated on: Mar 21, 2016

Shares edged up in Europe and Asia on Monday, shrugging off a retreat in oil on concerns over excess supply, as gains in Chinese shares and a benign US interest rate outlook brightened the mood.

The dollar edged up after falling for three successive weeks, most recently after US Federal Reserve policymakers revised down the number of times they expect to raise interest rates this year to two from four.

Sterling was a notable faller in the currency market. Traders cited concerns over splits in the ruling Conservative Party over last week's budget and a referendum on Britain's European Union membership, after a pro-"Brexit” minister quit on Friday over spending cuts.

The pan-European FTSEurofirst 300 stocks index reversed early losses in basic resources companies to trade up 0.2 per cent at the start of a week shortened by the Easter break and, on Monday, a holiday in Japan.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.1 per cent after entering positive territory for the first time this year on Friday. However, shares in Australia and South Korea fell.

Chinese stocks rose. The CSI 300 index of the largest listed companies in Shanghai and Shenzhen closed up 2.4 per cent, while the Shanghai Composite gained 2.2 per cent.

China's state margin lender, the China Securities Finance Corp, said it would resume some short-term lending after suspending parts of its business 18 months ago. It also cut brokerages' borrowing costs.

“It's a clear signal that regulators are ready to provide the market with easier, and cheaper funding,” said Wang Yu, analyst at Pacific Securities.

Top Chinese officials had said on Sunday the economy was showing signs of improvement, while capital outflows from the county were moderating.

Gyrations in the oil price, which are up some 50 per cent from lows around $27 a barrel hit earlier this year, have been big drivers of financial markets in recent months, along with slowing growth in China and the outlook for US interest rates.

Brent crude, the international benchmark, last traded at $40.78 a barrel, down 42 cents as the number of active US rigs rose, potentially deepening the global glut of oil that has pulled prices down from $100 since mid-2014.

The dollar index, which measures the greenback against a basket of currencies, rose 0.2 per cent.

The euro fell 0.2 per cent to $1.1245, while the yen gained 0.2 per cent to 111.39 per dollar.

Sterling fell 0.5 per cent to $1.4401, pummeled after the resignation of eurosceptic Work and Pensions Secretary Iain Duncan Smith heightened worries over divisions in Prime Minister David Cameron's government before the June 23 referendum.

“Sterling does not normally react strongly to UK politics so this is probably due to Brexit,” said Richard Benson, head of portfolio investment at currency managers Millennium Global in London. “The referendum is just making people focus on issues like this a lot more.”

Yields on low-risk German government bonds fell. Ten-year yields were last down 3.5 basis points at 0.19 per cent.

Gold last traded at $1,245.50 an ounce.

Published on January 20, 2018

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