Stock Market News (European Open) – European stocks broadly in the green; Japanese indices decline on ex-dividend adjustments

Carol, XM Investment Research Desk

In Asia, the Nikkei 225 and Japan’s broader equity gauge, the Topix, finished the day lower by 0.3% and 0.5% respectively. Hong Kong’s Hang Seng added 0.5% and the Shanghai Composite gained 0.1%. Australia’s S&P/ASX 200 lost 0.1%.

The yen has been weakening relative to the US currency with the dollar benefitting from comments made yesterday by Fed Chair Janet Yellen. Among other comments, the Fed chief said that it “would be imprudent to keep monetary policy on hold until inflation is back to 2%.” Renewed hopes on tax reform are also supporting the greenback. US President Donald Trump and Republican leaders will today announce their tax plan, with the former saying yesterday that he wants bipartisan cooperation on this front.

Dollar/yen rose close to the 113 handle, a two-month high, as Asian traders were about to head home for the day. This is generally supportive of Japanese equities as corporations in the country heavily rely on exports. However, ex-dividend adjustments pushed Japanese benchmarks lower. Indicatively, more than half of the companies comprising the Topix traded without the right to receive the next dividend.

All major indices in Europe were in positive territory during morning European trading. The closely-watched FTSE 100, DAX and CAC 40 were up by 0.1%, 0.5% and 0.15% respectively. IBEX 35, the Spanish blue-chip index, was up by a hefty 1.2%. The benchmark has suffered earlier in the week on uncertainty over Catalonia’s independence referendum. In latest developments, the Spanish government said yesterday that police would take control of voting booths in Catalonia to help prevent the planned independence referendum which it has declared to be illegal.

The pan-European Stoxx 600 was trading 0.2% higher, touching a two-month high of 385.38 along the way. Meanwhile, the blue-chip Euro Stoxx 50 was up by 0.5%. Eurozone exporter-heavy benchmarks are supported by the euro’s weakness after political uncertainty made a comeback following Sunday’s German elections. Euro/dollar was last trading 0.4% lower, reaching a fresh one-month low of 1.1729.

Financials led the gains within the Stoxx 600, with Stoxx 600 Banks being up by a whopping 1.5%. Spanish banks Banco de Sabadell (up 4.9%) and Caixabank (up 3.5%) were the sub-index’s best performers, with the former also being the second-best performer within the overall Stoxx 600.

Speculation over Alstom and Siemens merging their rail businesses did materialize with the companies making the relevant announcement during yesterday’s US session. The former was last up by 6.4%, rendering itself the lead gainer within the Stoxx 600, while the latter was one of the best performing stocks within the DAX, being last up by 1.9%. At its peak today, Alstom rose to its highest since 2011.

Swedish retailer ICA Gruppen (down 3.8%) was the Stoxx 600’s worst underperformer. Broker SEB downgraded the company to “sell”.

Futures markets were last projecting a higher open on Wall Street – Dow Jones contracts were 0.05% higher, with S&P 500 and Nasdaq equivalents up by 0.1% and 0.2% respectively. The Dow fell 0.05% yesterday to record its longest losing streak since June, falling for four straight sessions. The S&P 500 finished marginally higher and the Nasdaq 100 added 0.2% with technology stocks, despite overall advancing, giving up on a significant portion of earlier gains.