Equities markets across the world firmed Monday as investors lost their fear of higher US interest rates, focusing instead on signs of economic recovery.
Trading volumes were, however, sharply curtailed by London and Wall Street closures due to bank holidays.
But those European dealers present found reason to cheer data showing that German inflation was back in the black, a sign that economic recovery in Europe’s powerhouse economy is finally translating into higher prices.
An upward revision in French growth also lifted spirits.
“While not exactly splendid, the outlook for the eurozone economy is quite satisfactory,” said Holger Schmieding, an economist with Berenberg bank.
This will comfort the European Central Bank in its unprecedented stimulus efforts, and allow the ECB to sit back at this week’s monetary policy council meeting without doing more for now, analysts predicted.
Across the Atlantic, a speech by US Fed chief Janet Yellen Friday boosted expectations of higher US interest rates in June or July.
While rate hikes are usually seen as bad for stock markets, increasing corporate borrowing costs and sapping consumer spending, equity markets are this time focusing instead on the economic rebound behind the projected rate rise.
“Janet Yellen’s remarks on Friday confirm that at least one increase in the Fed rate is likely this year,” Ric Spooner, chief market analyst at CMC Markets, wrote.
“Traders will take confidence from the fact that stock markets are firm in the face of this confirmation.”
The Frankfurt main stock index rose 0.5 percent after data showed that German inflation returned to positive territory in May on the back of rising prices for rents and services.
France also had good news to report. An upward revision of the first quarter growth rate by 0.1 points to 0.6 percent and an increase of 1.5 percentage points in the French reading on the EU’s Economic Sentiment Indicator both lifted the mood, with the Paris CAC index ending 0.3 percent higher on the day.
Oil prices regained some ground as the dollar fell back from its highs, with North Sea Brent for July rising 12 cents to $49.44 while US benchmark West Texas Intermediate for July delivery edged 2 cents higher to $49.35.
Traders are now looking to Thursday’s meeting of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna, where few expect a breakthrough on production cuts as the Saudi-sponsored strategy of pricing US shale producers out of the market appears to be working.
A return of the oil price to around $50, after production disruptions in Canada as well as unrest in Nigeria, is expected to take the pressure off oil ministers to reduce output.
– Key figures around 1540 GMT –
London – Closed for public holiday
New York – Closed for public holiday
Frankfurt – DAX 30: UP 0.5 percent at 10,333.23 (close)
Paris – CAC 40: UP 0.3 percent at 4,529.40 (close)
EURO STOXX 50: UP 0.4 percent at 3,089.97
Tokyo: Nikkei 225: UP 1.4 percent at 17,068.02 (close)
Shanghai – Composite: UP 0.04 percent at 2,822.151 (close)
Hong Kong – Hang Seng: UP 0.3 percent at 20,629.39 (close)
Euro/dollar: UP at $1.1136 from $1.1113 on Friday
Dollar/yen: UP at 111.07 yen from 110.37 yen