European Shares, Euro Gain as Investors Look to ECB
Stocks in Europe and U.S. futures edged higher Thursday, and the euro jumped against the dollar, after the European Central Bank left its monetary policy unchanged while reaffirming the resilience of the eurozone economy.
Futures pointed to a small opening gain for the Dow Jones Industrial Average after Wall Street closed slightly higher on Wednesday. The Stoxx Europe 600 added 0.2%, while most markets in the Asia-Pacific region were little changed.
On Wednesday, U.S. stocks rose slightly after President Donald Trump backed a deal with congressional Democrats to attach hurricane relief money to a three-month extension of both government funding and the debt limit. That also prompted some modest moves in U.S. government bonds and the U.S. dollar.
In Europe, investors were focusing their attention on the ECB's press conference Thursday in the hope of getting more details on when the central bank could scale back its bond purchases.
But ECB President Mario Draghi gave little away on that front, saying decisions over its policy mix would likely be taken in October. But Mr. Draghi did address another major talking point: the recent rise of the euro. The single currency is up over 14% against the dollar this year. That has damped eurozone inflation by lowering import prices and led the ECB to cut its inflation forecast slightly on Thursday.
Mr. Draghi said the recent exchange-rate volatility "represents a source of uncertainty" that requires monitoring. But investors appeared to overlook those comments and focus on the ECB's upgrade of its growth forecasts Thursday, which helped send the euro up 0.9% to $1.2031.
Seamus Mac Gorain, a portfolio manager at J.P. Morgan Asset Management, said there is a limit to how far the ECB can talk down the currency given the strong growth in the eurozone and the fact that the euro doesn't look overly expensive based on traditional currency valuation models.
Still, the euro's rapid appreciation in recent months will mean the ECB won't "want it to go too much higher from here," he added.
Elsewhere in currency markets, the WSJ dollar index, which measures the dollar against a basket of 16 other currencies, fell 0.5%.
Data released Thursday showed the eurozone economy grew more quickly over the 12 months through June than previously estimated, further underlining the resilience of the economic recovery. European stocks rose following the announcement, though later pared some of those gains.
European stocks were led higher by technology shares, with the Stoxx Europe 600 Technology subindex up more than 1%.
In bond markets, the yield on the 10-year German government bond was little changed at 0.338%, according to Tradeweb, while the 10-year Treasury yield was slightly lower Thursday at 2.088%. Yields fall as prices rise..
The biggest moves in the Asia-Pacific region came in Korea, where the Kospi rose 1.1%. as attention -- for now -- shifted away from North Korea. The rebound came after five consecutive trading sessions in the red, to mark its longest losing streak since April. The Kospi's rise was driven by gains from heavyweight Samsung Electronics amid a favorable outlook on demand for its organic light-emitting diode, or OLED, screens.
Elsewhere in the region, Hong Kong's Hang Seng Index slipped 0.3% Thursday, Japan's Nikkei Stock Average rose 0.2% and the Shanghai Composite Index fell 0.6%.
In commodity markets, Brent crude oil rose 0.2% to $54.30 a barrel. Gold rose 0.8% to $1,349.80 an ounce.
Write to Christopher Whittall at christopher.whittall@wsj.com and Kenan Machado at kenan.machado@wsj.com
(END) Dow Jones Newswires
September 07, 2017 09:41 ET (13:41 GMT)