European stocks advanced on Tuesday, as investors took heart from a late rally on Wall Street and looked towards the possibility of more interest rate increases from the European Central Bank and US Federal Reserve.
The region-wide Stoxx 600 rose 0.5 per cent, while Germany’s Dax and France’s Cac 40 were up 0.5 per cent and 0.9 per cent respectively. London’s FTSE 100 climbed 0.4 per cent. Markets had been closed since Friday for the Easter holiday.
US markets recovered strongly on Monday afternoon from a weak start to the day’s trading, with the S&P 500 closing up 0.1 per cent and the Nasdaq ending flat.
The gains come in the wake of promising data out of the US on Friday. The number of jobs added to the economy fell in March to 236,000, but investors said the decline was probably not significant enough to deter the Fed from raising rates again. Markets are now pricing in more than a 70 per cent probability that both the Fed and ECB will raise rates by 0.25 percentage points at their next meetings.
“There’s a push and pull between the acute phase of the recent banking panic fading in the rear-view mirror, which is helping to support risky assets,” said Neil Shearing, group chief economist at Capital Economics. “On the other hand, markets are weighing up the strength of the US payroll data and chances of another rate hike.”
The US releases this week its March consumer price index, along with minutes from the most recent Federal Open Market Committee meeting. The eurozone will release industrial production data.
US futures had moderate gains on Tuesday, with contracts tracking the blue-chip S&P 500 up 0.3 per cent and those tracking the tech-heavy Nasdaq up 0.4 per cent.
Yields on two-year US Treasuries fell 0.02 percentage points to 3.98 per cent, while those on 10-year notes slipped 0.02 percentage points to 3.39 per cent.
Ten-year German Bund yields rose 0.07 percentage points to 2.25 per cent, while two-year contracts rose 0.1 percentage points to 2.67 per cent.
In Asia, the Hang Seng index closed up 0.8 per cent. China’s CSI 300 lost 0.1 per cent after inflation data came in weaker than expected, with monthly consumer prices falling 0.3 per cent.
The dollar index, which measures the greenback against a basket of six other currencies, was flat. The euro and sterling rose 0.5 per cent against the dollar.
Brent crude rose 0.2 per cent to $84.32 per barrel, and West Texas Intermediate, the US equivalent, rose 0.3 per cent to $79.94 per barrel.
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