Stocks wobble after busy week for central banks

World stock markets mostly rose Friday and currencies gyrated as investors digested diverging interest-rate decisions by central banks on three continents this week.

In Europe, equities climbed with Frankfurt striking a new record after an upbeat session in Asia, which was lifted by hopes China will unveil fresh measures to kickstart growth.

Wall Street stocks rose at the start of trading, but gave up those gains as European markets closed.

“European markets have ended the week on a positive note as expectations of more stimulus from China, and the belief that the current cycle of rate increases is close to coming to an end, has seen the DAX push up to another new record high,” said market analyst Michael Hewson at CMC Markets.

The euro hit a one-month peak at $1.0973, one day after the European Central Bank hiked interest rates to a 22-year high and warned another hike in July was very likely to tackle high inflation. It later fell back against the dollar.

The yen struck a 15-year euro low after the Bank of Japan maintained ultra-loose monetary policy, while the dollar struggled to bounce from losses fuelled by bets the US Federal Reserve is near the end of its tightening cycle.

Higher interest rates make currencies more attractive to traders as it boosts returns from investments such as government bonds.

– ‘Divergence’ –
“This week has seen a divergence in global central bank policy,” noted Victoria Scholar, head of investment at Interactive Investor.

“Different economies are dealing with different challenges.”

Markets could face higher trading volumes and varied price action as a result of so-called Triple Witching day on Friday, when an estimated $4.2-trillion worth of stock options simultaneously expire, she added.

The Fed paused Wednesday after 10 straight interest rate increases — but signalled more to come in order to tame inflation.

It began rapidly and aggressively raising rates in March last year to tackle high inflation, while the ECB has adopted a more gradual approach to monetary tightening.

However, both institutions have indicated they expect more hikes will be needed to bring inflation back under control.

The People’s Bank of China (PBoC) went the other way this week, cutting rates to boost its flagging economy.

“China has faced a bumpier-than-expected recovery out of the pandemic, prompting its central bank to stimulate its economy,” Scholar told AFP.

– Key figures around 1530 GMT –
New York – Dow: FLAT at 34,415.59 points

London – FTSE 100: UP 0.2 percent at 7,642.92 (close)

Frankfurt – DAX: UP 0.4 percent at 16,357.63 (close)

Paris – CAC 40: UP 1.3 percent at 7,388.65 (close)

EURO STOXX 50: UP 0.7 percent at 4,394.82 (close)

Tokyo – Nikkei 225: UP 0.7 percent at 33,706.08 (close)

Hong Kong – Hang Seng Index: UP 1.1 percent at 20,040.37 (close)

Shanghai – Composite: UP 0.6 percent at 3,273.33 (close)

Euro/dollar: DOWN at $1.0932 from $1.0945 on Thursday

Pound/dollar: UP at $1.2823 from $1.2784

Dollar/yen: UP at 141.64 yen from 140.29 yen

Euro/pound: DOWN at 85.24 pence from 85.62 pence

Brent North Sea crude: UP 0.1 percent at $75.77 per barrel

West Texas Intermediate: UP 0.3 percent at $70.85 per barrel