By Marc Jones
LONDON (Reuters) – World equity markets added to their best month since the COVID vaccine breakthroughs of late 2020 on Thursday as Europe digested another far-right election shock and oil skidded after OPEC+ postponed its weekend meeting.
Traders were getting their moves in despite the annual U.S. Thanksgiving holiday scything volumes but there was plenty to keep them busy while they did it.
Slightly stronger than expected German, French and UK PMI data nudged the euro, sterling and bond yields higher, Sweden’s crown dropped as its central bank left rates on hold while Dutch bank stocks fell after anti-European Union far-right populist Geert Wilders scored a huge election win.
The PMI beats were “not enough to say we have turned the corner on the economy,” said Close Brothers Asset Management chief investment officer Robert Alster, adding that activity in Germany and France had still contracted.
“Holland is a genuine surprise as a win for the right, but I suspect the market will wait to see what happens in terms of a coalition.”
A fan of Hungary’s eurosceptic Prime Minister Viktor Orban, the vocally anti-Islam Wilders has vowed to halt all immigration, slash Dutch payments to the EU and block the entrance of any new members, including Ukraine.
Beating all predictions, his Freedom Party (PVV) won 37 seats out of 150, well ahead of 25 for a joint Labour/Green ticket and 24 for the conservative People’s Party for Freedom and Democracy (VVD) of outgoing Prime Minister Mark Rutte.
ECB MINUTES
For traders, the next thing was the minutes of the European Central Bank’s most recent meeting that showed cautious optimism about their inflation fighting efforts.
“Overall, the process of disinflation seemed to be proceeding largely as expected,” the ECB said. “If anything, the disinflation process was proceeding somewhat faster than expected.”
Turkey’s central bank also flashed its recently reacquired inflation-fighting credentials by raising its policy rates by another punchy 500 basis points (bps) to 40% having been just 8.5% in early June before the reelection of President Tayyip Erdogan.
U.S. traders were eyeing their Thanksgiving meals rather than dealing, while in Asia overnight the focus had been signs of more help coming for China’s long-suffering property market.
MSCI’s broadest index of Asia-Pacific shares outside Japan ended up 0.3% in thin trading, with Japan also on holiday, though Chinese real estate stocks jumped 3% on reports debt-laden Country Garden would be on a list of developers getting support.
Meanwhile, a large wealth manager with heavy exposure to the property market disclosed that it faces insolvency with relevant liabilities of up to $64 billion.
Chinese government advisers will recommend to an annual policymakers’ meeting that economic growth targets for next year be set at 4.5% to 5.5%, Reuters had reported on Wednesday.
Wall Street’s benchmark S&P 500 is nearing a fresh high for 2023 and both it and MSCI’s all-country world index are both up more than 8% this month alone. For the MSCI world index, that is the best showing since November 2020 when COVID-19 vaccine hopes were driving markets wild.
Germany’s 10-year bund, the benchmark for Europe, was set to close around 5 bps higher on the day at 2.62% having touched 3% last month. Ten-year U.S. Treasuries are now at 4.4% compared with their October peak of 5%.
The euro’s bounce pushed the dollar index back down towards a 2-1/2 month low having moved away from it on Wednesday after the number of Americans filing new claims for unemployment benefits fell more than expected.
Sterling also recovered from a knock it had taken on Wednesday when UK finance minister Jeremy Hunt unveiled a string of tax cuts in his autumn budget, but also forecast a far more sluggish economic outlook than previously expected.
In commodity markets, news that OPEC+ had postponed a weekend meeting sent both Brent and U.S. WTI down as much 2% to $80.70 and $76.03 per barrel respectively on expectations it might see the group cut output less than anticipated.
In cryptocurrencies, buyers were still digesting the news of Binance chief Changpeng Zhao stepping down and pleading guilty to violations of U.S. anti-money laundering laws as part of a $4 billion settlement.
Bitcoin fell by 0.8% to $37,117 after rising nearly 5% on Wednesday.
(Reporting by Marc Jones; Editing by Christina Fincher and Jonathan Oatis)
