LONDON: European stocks jumped further Wednesday on the eve of a key ECB policy meeting, while investors gave a lukewarm response to a takeover bid for the London Stock Exchange by its Hong Kong rival.
News that US President Donald Trump had fired his hawkish national security adviser John Bolton also lifted sentiment, with analysts saying it could see the White House take a less strident approach and ease geopolitical tensions.
“Equities in Europe are higher… as traders look ahead to tomorrow’s European Central Bank (ECB) update, and Beijing’s decision to soften its stance on the US has helped sentiment too,” noted David Madden, market analyst at CMC Markets UK.
China on Wednesday said it would spare a number of US products from punitive tariffs in what is seen as an olive branch by Beijing in the protracted trade war ahead of high-level talks next month.
However, the goods do not include big-ticket agricultural items that could be crucial to the ultimate success of any agreement between the two sides, whose stand-off is dragging on the global economy.
With the economy stuttering, attention has turned increasingly to central banks as investors look for more stimulus.
On Thursday, the ECB holds one of its most anticipated gatherings and hopes are for a series of fresh measures including a possible interest rate cut, fresh bond-buying quantitative easing (QE) or other loosening tools.
That is followed by the Federal Reserve’s board meeting next week, where it is tipped to announce another reduction in borrowing costs as the world’s top economy shows signs of stalling.
“With the expectation of the resumption of quantitative easing by the ECB… and a rate cut by the Federal Reserve next week, the risk environment has solidified and tempted investors out of hiding from the bond markets and back into equities,” said Jeffrey Halley, senior market analyst at OANDA.
Hong Kong led gains by rallying 1.8 percent as investors made the most of the upbeat mood to pick up cheap stocks after months of sometimes violent protests in the city weighed on the stock market. Property firms were among the biggest gainers.
– Stock Exchange takeover? –
After the close, the Hong Kong Stock Exchange said it had bid almost £32 billion for its London rival.
The blockbuster proposal including debt, worth $40 billion or 36 billion euros, is, however, dependent on the London Stock Exchange Group (LSEG) scrapping a planned $27-billion takeover of US financial data provider Refinitiv.
In reaction, LSEG said it would “consider the proposal” but stressed that it “remains committed” to buying Refinitiv.
The surprise news initially sent LSEG shares surging ten percent.
They later stood 5.2-percent higher at £71.5, far below the offer price of more than £83 per share as analysts doubted the likelihood of a deal being struck amid LSEG’s commitment to Refinitiv.
“It’s a bold move and one that appears to have a low chance of success,” said Neil Wilson, chief market analyst at Markets.com, noting also that the London exchange had a history of failed tie-ups.
Elsewhere Wednesday, companies linked to Apple enjoyed healthy buying after the US tech giant on Tuesday unveiled new iPhones, including a lower-priced offering, and set launch dates for its original video offering as well as its game subscription service.
In foreign exchange, the pound recovered further after a Scottish court ruled that British Prime Minister Boris Johnson’s decision to suspend parliament in the run-up to Brexit was unlawful.
Oil prices also rebounded as US-Iran tensions rose again. Crude futures had slid Tuesday on a possible easing of tensions in the stand-off between the pair.
But on Wednesday, President Hassan Rouhani warned that Iran was ready to further reduce its nuclear accord commitments in response to crippling US sanctions.
– Key figures around 1100 GMT –
London – FTSE 100: UP 1.0 percent at 7,338.17 points
Frankfurt – DAX 30: UP 0.8 percent at 12,365.61
Paris – CAC 40: UP 0.5 percent at 5,618.76
EURO STOXX 50: UP 0.5 percent at 3,515.28
Tokyo – Nikkei 225: UP 1.0 percent at 21,597.76 (close)
Hong Kong – Hang Seng: UP 1.8 percent at 27,159.06 (close)
Shanghai – Composite: DOWN 0.4 percent at 3,008.81 (close)
New York – Dow: DOWN 0.3 percent at 26,909.43 (close)
Pound/dollar: UP at $1.2362 from $1.2357 at 2050 GMT
Euro/pound: DOWN at 89.11 pence from 89.37 pence
Euro/dollar: DOWN at $1.1015 from $1.1042
Dollar/yen: UP at 107.71 yen from 107.53 yen
Brent North Sea crude: UP 44 cents at $62.82 per barrel
West Texas Intermediate: UP 48 cents at $57.88 per barrel.