European stocks marked their first weekly rise in four on Friday, boosted by a surge in banking shares on expectations of further monetary policy tightening by the European Central Bank, while soaring metal prices lifted mining stocks.
The pan-European Stoxx 600 index rose 1.5 per cent to close at over one-week highs.
European stocks briefly shed gains in afternoon trading following reports that ECB policymakers are likely to kick off a debate next month about whittling down the €4 trillion bond pile.
That comes a day after the central bank raised its key rates by an unprecedented 75 basis points (bps) and promised further hikes. Several money houses are forecasting another 75 bps rate hike in October.
Euro zone banks, rocked by worries over their profitability in a low interest rate environment, jumped 3.2 per cent to mark their biggest percentage gains in almost two months. The index is still down 16.3 per cent year to date.
“Traders are in risk-on mood even though yesterday there was a rate hike from the ECB and hawkish commentary from [Fed Chair] Jerome Powell,” said David Madden, market analyst at Equiti Capital. “It is possible that dealers are getting used to the idea of interest rates being increased, and elevated bond yields.”
DUBLIN
Bank of Ireland and AIB rose in tandem with other European financials, increasing by 6.8 per cent and 2.8 per cent respectively, driving Dublin’s Iseq forward. Both bank stocks were buoyed by the ECB’s historic rate hike. Banks including Deutsche Bank and BofA have said they expect another 75 basis point rate hike from the European Central Bank in October.
Ryanair rose 2.7 per cent to €12.79. In August it flew a record number of passengers for the fourth month in a row as it continued to consolidate its position as Europe’s largest airline by passenger numbers. The State’s largest hotel chain Dalata rose by 3.5 per cent to €3.43 amid more upbeat sentiment about the travel sector.
Kingspan and CRH rose by 2 per cent and 1.7 per cent.
LONDON
Markets in London traded as usual on Friday, and saw shares and the pound trade higher. The London Stock Exchange confirmed that it planned to maintain normal opening hours after the death of the British queen, but would close during any public holidays.
The FTSE 100 joined an international rally, which saw global markets break out into a sea of green after recent spells of poor performance.
The FTSE ended the day up 1.2 per cent at 7,351.07 points, a rise of 89.01. In company news, Asos warned on profits after sales undershot expectations in August. Customers were tightening their belts and not shopping as much for clothes, the business said.
EUROPE
While the Stoxx 600 managed to end the week 1.1 per cent higher, investors doubt whether the rally can be sustained as Russia turns off its gas taps to Europe indefinitely amid a brewing cost-of-living crisis in the region.
“We remain negative on European equities given a backdrop of heightened geopolitical/energy uncertainty at the same time as central banks are tightening policy into an economic slowdown,” Morgan Stanley analysts said in a note. Telecom Italia (TIM) shares rose 2.8 per cent as sources said it was close to kicking off a process to sell a minority stake in its enterprise service arm.
NEW YORK
Wall Street’s main indexes rose on Friday, boosted by technology and high-growth stocks, as investors awaited key inflation data next week to gauge the pace of interest rate hikes by the Federal Reserve.
US equities have stabilised this week after a sharp sell-off that began in mid-August on worries about the impact of tighter monetary policy and a slowdown in Europe and China.
The indexes are on track to snap their three-week losing streak, despite hawkish remarks from Fed policymakers that boosted expectations of another outsized rate hike at the central bank’s September 20th-21st meeting.
High-growth stocks such as Tesla, Apple, Alphabet and Amazon gained more than 1 per cent each. The CBOE volatility index, a gauge of investor anxiety, fell to a two-week low of 22.9 but stayed above its long-term average of 20. – Additional reporting: Reuters
