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Stimulus effects: stocks hit record highs as second half starts strong

European financial markets got off to a good start in the second half of the year on Thursday, with stocks pushing back a rapid re-acceleration of coronavirus cases in the region and dollar and oil extend strong first half rallies, reports Reuters.

The first 1% gains in London, Frankfurt, Paris and Milan meant the pan-European STOXX 600 was set to join Wall Street at record highs. In a session in Asia thinned by a Hong Kong holiday, the Japanese Nikkei fell 0.3% and the yen hit a 15-month low at 111.18 per dollar while the US currency continued to steadily advance.

There were few signs of sagging oil prices either. Brent rose nearly 1% to just over $ 75 a barrel after a skyrocketing 45% rise in the first half of the year posted one of its best start to the year on record. Eurozone government bond yields also edged up, with the latest economic data showing the 19-nation bloc’s manufacturing sector grew at a record pace last month, as companies saw the strongest rising raw material costs for more than two decades.

“Eurozone manufacturing has continued to grow at a rate unmatched for nearly 24 years survey history in June as demand increased with further easing of covid-19 containment measures, ”said Chris Williamson, chief economist at IHS Markit.

“However, the rapidity of the recent surge in demand has led to a seller’s market, as capacity and transportation constraints limit the availability of inputs for factories, which in turn has pushed up industrial prices to a low. pace never seen before by the survey. ‘

The benchmark 10-year German Bund yield rose one basis point on the day to -0.19%. French, Spanish and Italian 10-year yields increased by a similar amount. Most major economies have seen the yields on their government bonds, which drive up borrowing costs in their economies, strongly this year on bets that central banks will slow down recovery as a global recovery pushes inflation up. Due to a shortage of shipping containers and supply chains severely affected by the pandemic, the Eurozone data input price index fell from 87.1 to 88.5, by far the highest of the history of the investigation. Inflation in the bloc had fallen to 1.9% last month, according to official data released on Wednesday.

“The virus is still playing a role… although it’s hard to see a direction in anything right now,” ING economist Rob Carnell said on the phone from Singapore.

“There is a broad feeling that the dollar is not such a bad unit to hold,” he said, as traders also waited for US employment data on Friday for clues about the Federal Reserve’s next move.

“Everyone is a little nervous. “


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