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Europe: Equities rise as eurozone exits deflation
[LONDON] European stocks posted gains on Thursday as the euro hit a nine-week dollar high on weak US data that dimmed the chances of a Federal Reserve interest rate hike in early summer.
Markets had fallen sharply the previous day on news that the world's biggest economy grew by just 0.2 per cent in the first quarter, well below the one percent rate anticipated by analysts.
But on Thursday, European equities were given a lift by eurozone data showing that the bloc has climbed out of four months of deflation.
Frankfurt's DAX 30 index gained 0.19 per cent to 11,454.38 points while in Paris the CAC 40 was up 0.14 per cent at 5,046.49 points, ahead of the May 1 holiday weekend. Trading at both markets will resume on Monday.
London's benchmark FTSE 100 index closed 0.21 per cent higher at 6,960.63 points. Friday is a business day in London, with markets shut only on Monday for a bank holiday.
The European single currency jumped as high as US$1.1249.
"The world's most heavily-traded FX pair has been surging higher in the recent days mainly because of weakness in US data; correspondingly, European equities have been moving south," said analyst Fawad Razaqzada at trading site Forex.com.
"Of course, the slowing pace of growth in the world's largest economy matters for the stock market too because it is one of the main export destinations for most of the major European companies.
"A weaker euro is obviously good news for European exports. But now that it is rising, stock market speculators are paring back their bullish bets accordingly."
The euro later stood at US$1.1185, up from US$1.1128 late in New York on Wednesday.
"The dollar has weakened severely against the pound and the euro. This is down to the markets pushing back the expectations of a US rate rise," noted CurrenciesDirect analyst Phil McHugh.
EMERGED FROM DEFLATION
US stocks dipped in Thursday's trading following a batch of mixed earnings, including from oil giant ExxonMobil and online listings company Yelp.
The Dow Jones Industrial Average was down 0.29 per cent, the broad-based S&P 500 lost 0.25 per cent while the tech-rich Nasdaq Composite Index dropped 0.63 per cent.
Most Asian stocks also sank on Thursday.
Back in Europe investors also tracked official data showing that the eurozone has emerged from deflation in April, reversing a dangerous bout of declining prices.
Inflation in the 19-nation single currency bloc hit zero percent in April, after minus 0.1 per cent in March, with low energy costs still impacting the cost of living, the EU statistics agency Eurostat said.
The news was welcomed at the European Central Bank, which in March launched a historic round of monetary stimulus to fight falling prices in the eurozone.
The biggest movement of leading stocks included Royal Bank of Scotland shares shedding 3.15 per cent to 338.50 pence on poor results.
The state-rescued lender revealed it sank into a first-quarter net loss of £446 million (S$906.5 million) on vast provisions for restructuring and costs linked to its past conduct.
That contrasted with a net profit of £1.195 billion a year earlier.
British Airways-owner International Airlines Group saw its shares slide 2.50 per cent to 545 pence.
That was despite news that IAG slashed its first-quarter net losses on increased transatlantic business, cost controls and an ongoing recovery at its Spanish wing Iberia.
On the upside, energy giant Royal Dutch Shell's 'A' share price rallied 0.37 per cent to 2,059.50 pence.
Shell revealed that profit, adjusted for one-off items and inventory changes, sank 56 per cent to US$3.2 billion in the reporting period.
However, that beat market expectations of US$2.5 billion, according to analysts polled by Bloomberg.