Bullish Sentiment Dominates Markets | Independent Newspapers Limited
Newsletter subscribe

Stock Market Report

Bullish Sentiment Dominates Markets

Posted: Jun 1, 2016 at 3:31 am   /   by   /   comments (0)

Bamidele Ogunwusi


U.S. stocks closed higher in the past week as investors brushed aside Federal Reserve’s comments that a rate increase may be justified this summer. Specifically, all three main indexes booked their biggest weekly gains in several weeks as traders prepared for a long weekend ahead of the Memorial day holiday.

The gains seen in the US equity indices was driven by a combination of  factors which include oil going over $50 a barrel as well as decreased anxiety around Brexit in the Eurozone. On the date front, U.S. first-quarter economic growth was revised up to 0.8 percent from a previous reading of 0.5%, based on a fresh estimate that shows somewhat stronger home construction.

European equities also brushed aside US rate hike related concerns to post strong weekly gains, with The Stoxx Europe 600 pushing 3.4 percent higher for the week which represented the benchmark’s strongest weekly performance since mid – February.

Economic numbers however remained mixed as surveys of purchasing managers in the Eurozone released showed that increasing activity in France and Germany in May was more than offset by softness in other parts of the currency area, despite the announcement of a fresh package of stimulus measures by the European Central Bank in March.

Expectations of higher interest rates in the US also boosted key equity indices in Asia, especially the financial services sector because of the potential increase in the gap between what the banks charge on loans and what they pay for deposits. In Australia, gains came after Fitch Ratings affirmed its ratings on the country’s major banks and said the lenders can manage growing risks linked to rising household debt and higher home prices. The comments follow a similar assessment from Moody’s that the banks’ balance sheets remain solid despite a recent jump in impaired loans.

On the domestic scene, the Monetary Policy Committee (MPC) at the end of its two-day policy meeting decided the leave key monetary policy variables unchanged. However, it guided that it is about to introduce a more flexible FX policy that will reduce illiquidity and limit its intervention to only the certain critical sectors of the economy.