European equities rose for a third straight day as investors brushed off fears about the Delta coronavirus variant and instead focused on bets for further monetary support from the European Central Bank.
The Stoxx 600 share index opened 0.6 per cent higher, following a 1.7 per cent rise on Wednesday. The regional equity gauge was on course to end the week slightly higher and remained close to its all-time high despite a global market wobble on Monday. London’s FTSE 100 traded flat.
Investors widely expect the ECB, at its meeting later on Thursday, to signal it will continue with the government debt purchases that have eased borrowing costs throughout the coronavirus crisis after its €1.85tn pandemic emergency purchase programme (PEPP) ends next year.
Such bond-buying programmes raise government debt prices, depress borrowing costs and can boost equity valuations by prompting investors to accept lower rates of earnings or dividends relative to share prices.
“Spikes in pandemic rates lead to markets getting worried about the fragility of the economic recovery,” said Zehrid Osmani, manager of Martin Currie’s global portfolio trust. But fresh lockdowns or other social restrictions lead to “central banks remaining very accommodative,” he said, “which naturally brings you towards equity markets in favour of bonds.”
The yield on 10-year German government debt, which moves inversely to the price of the benchmark eurozone fixed income security, was steady at minus 0.4 per cent on Thursday, around its lowest since early February. The 10-year US Treasury yield fell by 0.02 percentage points to 1.275 per cent.
“Recent Covid data point to another wave of infections, even in countries such as the UK that have vaccinated a large proportion of their populations,” said Paul Jackson, global head of asset allocation research at Invesco.
“With that backdrop, we do not expect the ECB to signal any tightening of policy at the upcoming meeting,” he said, “and wouldn’t be surprised to see some form of implicit loosening.”
The euro was steady against the dollar at $1.1796, having lost 0.6 per cent against the US currency so far this month.
In Asia, Hong Kong’s Hang Seng index rose 1.7 per cent and South Korea’s Kospi 200 rose 1.3 per cent following a strong session on Wall Street driven by robust quarterly earnings from Coca-Cola, advertising group Interpublic and telecom conglomerate Verizon.
Futures markets signalled the S&P 500 would gain 0.1 per cent in early New York dealings while the technology-focused Nasdaq Composite would add 0.2 per cent.
Brent crude, the international oil benchmark, dipped 0.2 per cent lower to $72.05 a barrel.