World stock markets rose Friday and currencies gyrated as investors digested diverging interest-rate decisions by central banks on three continents this week.
In Europe, Frankfurt, London and Paris equities climbed after an upbeat session in Asia, which was also lifted by hopes China will unveil fresh measures to kickstart growth.
Wall Street stocks also rose at the start of trading.
“Markets are ending the week on a positive note but there remains enormous uncertainty around inflation and interest rates that looks set to continue throughout the summer,” said Craig Erlam, seniro market analyst at OANDA trading platform.
The euro hit a one-month peak at $1.0973, one day after the European Central Bank hiked interest rates to a 22-year high and warned another hike in July was very likely to tackle high inflation.
The yen struck a 15-year euro low after the Bank of Japan maintained ultra-loose monetary policy, while the dollar struggled to bounce from losses fuelled by bets the US Federal Reserve is near the end of its tightening cycle.
Higher interest rates make currencies more attractive to traders as it boosts returns from investments such as government bonds.
– ‘Divergence’ –
“This week has seen a divergence in global central bank policy,” noted Victoria Scholar, head of investment at Interactive Investor.
“Different economies are dealing with different challenges.”
Markets could face higher trading volumes and varied price action as a result of so-called Triple Witching day on Friday, when an estimated $4.2-trillion worth of stock options simultaneously expire, she added.
The Fed paused Wednesday after 10 straight interest rate increases — but signalled more to come in order to tame inflation.
It began rapidly and aggressively raising rates in March last year to tackle high inflation, while the ECB has adopted a more gradual approach to monetary tightening.
However, both institutions have indicated they expect more hikes will be needed to bring inflation back under control.
The People’s Bank of China (PBoC) went the other way this week, cutting rates to boost its flagging economy.
“China has faced a bumpier-than-expected recovery out of the pandemic, prompting its central bank to stimulate its economy,” Scholar told AFP.
– Key figures around 1530 GMT –
New York – Dow: UP 0.3 percent at 34,503.33 points
London – FTSE 100: UP 0.3 percent at 7,648.67
Frankfurt – DAX: UP 0.7 percent at 16,408.55
Paris – CAC 40: UP 1.3 percent at 7,388.42
EURO STOXX 50: UP 0.9 percent at 4,404.74
Tokyo – Nikkei 225: UP 0.7 percent at 33,706.08 (close)
Hong Kong – Hang Seng Index: UP 1.1 percent at 20,040.37 (close)
Shanghai – Composite: UP 0.6 percent at 3,273.33 (close)
Euro/dollar: UP at $1.0952 from $1.0945 on Thursday
Pound/dollar: UP at $1.2822 from $1.2784
Dollar/yen: UP at 141.35 yen from 140.29 yen
Euro/pound: DOWN at 85.42 pence from 85.62 pence
Brent North Sea crude: DOWN less than 0.1 percent at $75.62 per barrel
West Texas Intermediate: DOWN less than 0.1 percent at $70.60 per barrel
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