Markets lifted by EU/China optimism
Equity markets suggested there was growing optimism ahead of tomorrow’s EU summit, with leaders expected to discuss measures to promote growth, support the troubled banking sector and ensure Greece remains in the euro. The leaders of France Italy and Spain are also expected to lobby for eurozone wide deposit insurance, or further still Eurobonds, although they will likely face opposition from the German Chancellor Angela Merkel, who has long opposed pooling common liabilities. The euro didn’t however match the optimism, the single currency’s 0.6% fall against the dollar suggested currency markets weren’t pricing in much progress from the meeting.
Markets also clung on to a report that suggested China will fast track approvals for infrastructure investment in an attempt to combat its slowing economy. Beijing has asked for project proposals by the end of June, with the possibility of bringing forward those originally planned for next year if further stimulus was required. Stocks with exposure to the China story, including miners and autos, were leading markets higher.
In contrast to the aforementioned, US existing home sales provide something tangible, with sales rising by 3.4% in April, the highest annual rate for almost two years, with the median price for a home jumping to $177,400, up 10% over a year. The news was welcomed by markets that have struggled for improving economic data recently.
On the domestic front, inflation as measured by the consumer price index fell to 3% today, below forecast of 3.1% and the previous reading of 3.5%. The FTSE 100 closed up 1.92%, up 102 points to 5406. The French CAC40 and the German DAX were also higher by more than 1.5%.