Equities are stronger as investors look past political risks

London — Stocks rose in Europe and Asia on Thursday and yields fell on some of the eurozone’s battered low-rated bonds as investors put aside the political risks that have dominated markets this week.

In a difficult start to the year, investors are pondering the effect of a new US president, an unpredictable European electoral calendar and a potential winding-down ofSt the central bank stimulus that has lifted risky assets across the globe.

Rising oil prices
pushed energy company shares higher in Europe on a busy day of corporate earnings while Asian stocks hit their highest in more than 18 months.
"The stabilisation of the oil price after its recent wobbles, together with solid earnings, for example, [Société Générale] today, is driving the positive sentiment," said Andy Sullivan, portfolio manager with GL Asset Management UK in London.
The pan-European Stoxx 600 index rose 0.4%. Bank shares also rose after French lender Société Générale reported lower fourth-quarter net income that nonetheless beat analysts forecasts.

 

 

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.3% to their highest since July 2015 with Hong Kong, Taiwan and China among the region’s best-performing markets.
Japanese shares, however, fell 0.5%, hit by earlier yen strength the day before Japan’s Prime Minister Shinzo Abe meets US President Donald Trump.
Yields on Spanish and Italian 10-year government bonds fell.
Earlier this week, concern over the effect of elections this year in countries including France and Germany saw investors sell bonds of lower-rated eurozone countries.
"We have some relief with investors shrugging off some of their concerns with a feeling that things went too far, too fast," said Martin Van Vliet, senior rates strategist at ING.

 

 

Spanish 10-year yields fell four basis points to 1.66% while Italian equivalents fell three basis points to 2.%.
French yields dipped one basis point to 1.01%. The premium investors demand to hold French rather than German debt hit its highest in four years on Wednesday, three months before the final round of a presidential election expected to include far-right, anti-euro candidate Marine le Pen.
Yields on German 10-year bonds, seen as among the world’s safest assets, rose 0.5 basis points to 0.31%. Apart from political risks, bond investors are pondering the effect of the European Central Bank (ECB) eventually winding down its bond-buying stimulus scheme, which has driven down borrowing costs in the bloc for the past two years.
ECB president Mario Draghi and German Chancellor Angela Merkel, bidding for re-election later this year, meet on Thursday. A number of German officials have called on the ECB to unwind its monetary stimulus.

 

 

The euro steadied just below $1.07 after falling on Wednesday to a two-week low of $1.0640. The yen fell 0.3% to ¥112.29 per dollar, having earlier traded as strong as ¥111.70. The dollar index, which measures the greenback against a basket of currencies, dipped 0.1%.
US treasury yields fell to their lowest since mid-January on Wednesday as investors re-assess how many interest rate rises can be expected from the Federal Reserve and look for clarity over whether Trump will make good on his campaign pledges for tax cuts and infrastructure spending.
Ten-year treasuries yielded 2.36% in European trade on Thursday, up 1.2 basis points.

Oil prices rose after an unexpected draw down in US petrol inventories. Brent crude, the international benchmark, rose 51c a barrel, or 0.9%, to $55.63.
In a sign that political risks are still on the radar, gold held close to three-month highs touched on Wednesday. Spot gold rose 0.1% to $1,243/oz, compared with Wednesday’s high of $1,244.67.
Reuters / BDlive