Kristian Rouz — The earnings season has been bringing out optimistic data so far, with most stock markets gaining during the daytime trade, but closing in the red mostly due to the US Fed leaning dovish, weighing on the dollar valuation. As the European stocks swing between gains and losses, a weaker dollar puts the Eurozone's foreign trade in jeopardy, while the solid corporate earnings suggest growth in the real economy is just picking up. Greece and UK have been attracting most of the attention with the former's commercial banks hoping to receive yet another package of the ECB monetary assistance, while the latter is moving to a hike in the base interest rate after the disappointing growth data.
The Stoxx Europe index, however, added 2.1% in April, extending gains in stocks up to 18% this year.
The broader all-European FTSEurofirst 300 Index shed 0.1% as mixed profits in the Spanish-based multinational bank BBVA and the British retailer Next (actually gaining 3.1% on solid sales) weighed on stocks. Miners were also hit by the slump in global commodities prices, with Antofagasta Plc and Outokumpu Oyj posting losses. British American Tobacco shed 1.9% as its quarterly earnings growth fell short of previous projections — nobody smokes these days.
News of the US Federal Reserve's policy cautiousness and its most likely reluctance to hike its base interest rate this time around prompted a slight appreciation of the euro against the US dollar. The euro added 0.1%, to $1.0994, striking a three-week high the previous day, now hovering near $1.10. The currency situation is hitting the Eurozone's foreign trade, which is now the biggest driver of economic expansion in the region.
Investors are also awaiting another round of government bonds from Portugal, Germany and Italy.
In the UK, which posted disappointing growth statistics just about a week before the national election, the Bank of England (BOE) is considering tightening its monetary policy, resulting in the sterling's greatest appreciation since 2012.
The pound strengthened 0.1% to $1.5361, while still flat against the common currency at 0.7159 pounds per 1 euro.
The BOE hinted it will increase rates for the first time in 12 months. UK 10-year bonds yields rose to their 7-week highs after the emission of 3 billion GBP ($4.6 billion) in government debt due 2025.
Such a change in BOE policies would significantly improve the UK's investment appeal with the Kingdom attracting investment money fleeing Asia-Pacific and some parts of the Eurozone, as well as boosting the nation's position in international trade. However, monetary tightening means lower inflation and modest economic expansion at best, and as the UK is nearly stagnating, the immediate consequences of the move might be frustrating.
In London, the FTSE 100 Index shed 0.35%, while the German DAX lost 0.54%, and the French CAC 40 Index retreated 0.65%.
