European stocks end higher on dollar gains

11:50 | 19/07/2018

Gains by the dollar in the wake of the Federal Reserve chief expressing confidence in the US economy despite global trade war fears helped push European stocks higher on Wednesday (Jul 18).

european stocks end higher on dollar gains
European stocks end higher on dollar gains, photo AFP

Meanwhile, a batch of strong earnings reports saw Wall Street keep rising for the most part.

"The positive sentiment began on Wall Street following Federal Reserve Chair Jay Powell's stating his confidence in the US economy to lawmakers" on Tuesday, said London Capital Group analyst Jasper Lawler.

In the first of his two days of testimony before lawmakers Powell indicated that the US central bank plans to continue gradually raising interest rates due given the strength of the economy, citing a strong job market and inflation figures.

While higher interest rates drag on corporate earnings and are usually not welcomed by stock investors, Powell's confidence in the economy helped reassure markets worried about a deepening trade war.

"We remain in an environment where investors believe higher earnings as a result of stronger growth outweighs the risks from higher interest rates.

Powell also acknowledged on Tuesday uncertainty about the "outcome of current discussions over trade policy", with US President Donald Trump hitting out at China and other economic partners as he adopts an aggressive "America First" policy.

Fears about an all-out China-US trade war continue to rattle investors, with both sides lodging counter-complaints at the World Trade Organisation after recently imposing tariffs and threatening more on billions of dollars' worth of goods.

Washington's traditional allies Japan and the EU have also not been spared hefty US tariffs.

However gains by the dollar helped push up stocks in Japan and Europe as a weaker currency can help boost exports.

Meanwhile the pound slid to a 2018 low at US$1.3010 on receding prospects of a UK interest-rate hike next month after British inflation undershot expectations.

The pound has taken a knock this week also from uncertainty surrounding the future of British Prime Minister Theresa May as she struggles to unite a divided Conservative Party over the government's Brexit strategy.

Meanwhile, shares in Google dipped 0.3 per cent after the EU slapped a record €4.34-billion fine on the firm for abusing the dominance of its Android operating system, although it pulled other tech shares into the red along with it.

"It is a huge future earnings hit for Alphabet," said London Capital Group's Lawler.

"The worry for the tech sector is that the EU doesn't stop here" as it has several other anti-trust investigations against tech firms underway, he added.

The tech-heavy Nasdaq Composite index was down nearly 0.1 per cent approaching midday in New York.

Elsewhere on Wednesday, oil prices extended losses as data showed that US stocks rose more than expected by analysts and production reached a new record.

Brent crude struck a fresh three-month low at US$71.23 per barrel.

Key figures at 1530 GMT:

New York - Dow: UP 0.3 per cent at 25,183.29 points

London - FTSE 100: UP 0.7 per cent at 7,676.28 (close)

Frankfurt - DAX 30: UP 0.8 per cent at 12,765.94 (close)

Paris - CAC 40: UP 0.5 per cent at 5,447.44 (close)

EURO STOXX 50: UP 0.8 per cent at 3,484.74

Tokyo - Nikkei 225: UP 0.4 per cent at 22,794.19 (close)

Hong Kong - Hang Seng: DOWN 0.2 per cent at 28,122.75 (close)

Shanghai - Composite: DOWN 0.4 per cent at 2,787.26 (close)

Pound/dollar: DOWN at US$1.3045 from US$1.3113 at 2100 GMT

Euro/dollar: DOWN at US$1.1645 from US$1.1662

Dollar/yen: DOWN at 112.79 yen from 112.84 yen

Oil - Brent Crude: DOWN 30 cents at US$71.86 per barrel

Oil - West Texas Intermediate: DOWN 30 cents at US$67.78 per barrel

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