Stocks Steady, French Bonds Recover as Election Fears Fade
February 23 2017 - 5:20AM
Dow Jones News
By Riva Gold and Ese Erheriene
Global stocks were largely steady Thursday while waning concerns
around the French election offered relief to the euro and French
government bonds.
The Stoxx Europe 600 was up 0.1% in morning trading, following
subdued sessions in Asia and on Wall Street.
Shares of Barclays PLC rose over 3%, leading gains in the
region, after the U.K. bank swung to a full year net profit and
said it was just months away from finishing a restructuring. Oil
and gas companies also climbed as Brent crude oil jumped 1.6% to
$56.94 a barrel.
A fall in metals prices weighed on the basic resources sector,
however, after iron-ore prices in China slid for a second day and
copper futures pulled back.
The euro and French government bonds continued to recover from a
recent selloff after centrist candidate François Bayrou announced
his offer of an alliance with independent centrist Emmanuel Macron
on Wednesday. Officials said Mr. Macron accepted Mr. Bayrou's
offer.
The news helped diminish some investors' fears of a victory for
anti-euro candidate Marine Le Pen. Recent polls had continued to
suggest Ms. Le Pen would likely be beaten in the second round of
the French election, but by a narrowing margin.
The euro was last up 0.1% at $1.0558 after snapping a
three-session losing streak on Wednesday. German 10-year yields
inched up to 0.279% from 0.272% previously and 2-year government
yields edged up from record lows, while French 10-year yields fell
to 0.998% from 1.025%. Yields move inversely to prices.
Investors had been avoiding French assets and the euro and
flocking to the safety of German stocks and bonds in recent
sessions. Germany's DAX index was unchanged Thursday after closing
at its highest since April 2015.
Global investors were also digesting the latest Federal Reserve
meeting minutes, where officials suggested that lifting U.S.
interest rates "fairly soon" may be appropriate in light of an
improving economy. Many officials continued to expect a gradual
pace of rate rises and only a modest risk of an inflation
overshoot.
The minutes did little to lift expectations for a rate rise in
March, with U.S. government bonds strengthening and the dollar
ending the day with modest declines. The WSJ Dollar Index was last
flat, while 10-year Treasury yields were unchanged at 2.416%.
Arthur Kwong, head of Asia Pacific equities at BNP Paribas
Investment Partners, said the firm is trying to stick with its
assumption that there will be three rate increases this year, "but
I think the feeling is getting more there may be only two."
Banks and financials mostly declined across Asia amid
disappointment there wasn't a clearer signal on rate rises, causing
Japan's Nikkei to end flat and Hong Kong's Hang Seng Index to shed
0.4%, after briefly rising to its highest level since September.
Higher interest rates tend to boost banks' profitability.
Shanghai shares pulled back on losses in infrastructure stocks,
as well as reports that the government plans to ban futures
companies from asset-management businesses--though analysts are
skeptical that it will carry out such drastic measures.
"The regulator must consider whether the market can absorb the
shocks from these tightening rules," says Xiao Shijun, an analyst
at Guodu Securities.
Futures pointed to small opening gains on Wall Street after a
decline in energy shares sent the S&P 500 narrowly lower on
Wednesday.
U.S. stocks continue to hover near record highs amid hopes that
stronger growth, higher inflation and tax cuts from the new
administration will lift corporate profits.
"It feels to me like the market is pricing in a lot more
optimism than it should be," said David Lafferty, chief strategist
at Natixis Global Asset Management.
"We have the most controversial president in history, the U.K.
is leaving the EU, there are existential risks in France, high
valuations...and volatility is low."
William Horobin
,
Yifan Xie
, David Harrison and Hiroyuki Kachi contributed to this
article.
Write to Riva Gold at riva.gold@wsj.com and Ese Erheriene at
ese.erheriene@wsj.com
(END) Dow Jones Newswires
February 23, 2017 05:05 ET (10:05 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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