Europe open: Shares extend rally on recovery hopes ahead of Fed meet
European shares maintained their week-long rally on Tuesday as hopes of a swift economic recovery from the Covid-19 pandemic drove sentiment.
The pan-European STOXX 600 was up 0.4%, with Germany’s DAX rising 0.68% and the UK's FTSE 100 up 0.44% after a fall in the unemployment rate in April.
Investors are also awaiting the US Federal Reserve two-day policy meeting starting later on Tuesday for indications of the central bank view on recent inflation rises.
“Ahead of the Federal Reserve meeting this week there is no sign of a tantrum. Stocks are happy to catch the tailwinds higher despite being caught between a super-hot inflation reading last week and the Fed’s policy meeting,” said Markets.com analyst Neil Wilson.
“Rates have been steady coming into the meeting with the benchmark 10-year (bond) yield hovering a little below 1.5% and have been edging lower since the end of March - allowing growth stocks to catch some bid in recent weeks.”
“The calm shows markets are broadly in tune with what the Fed’s views so far, but this can shift if the Fed acts too early or delays too long. Indeed, today’s Bank of America fund manager survey shows 72% think inflation is transitory, which pretty much tells you all you need to know about market positioning.”
In the UK, figures released earlier by the Office for National Statistics showed the UK unemployment rate fell in April as the economy began to reopen. The unemployment rate declined to 4.7% in the three months to April from 4.8% in March and in line with consensus expectations.
In equity markets, Primark owner Associated British Foods was the biggest gainer on the FTSE 100, with traders pointing to readacross from a positive first-quarter update from fast fashion retailer Boohoo.
Anglo American was hit by a downgrade to ‘sector perform’ from ‘outperform’ at RBC Capital Markets.