European stock markets are looking strong this week, with the main STOXX 600 index hitting a new record high. On Friday, the index rose by 0.3%, putting it on track for its best weekly performance since late April.
This overall positive momentum is largely due to expectations that the US Federal Reserve will cut interest rates soon. Leading the gains on Friday were two sectors: banks and mining companies (basic resources).
Banks in the Eurozone saw a 1% rise, with Austria’s Raiffeisen Bank soaring after news suggested the EU might lift some sanctions to help the bank. Separately, Dutch bank ABN Amro climbed after getting a positive rating upgrade from Goldman Sachs.
The mining sector gained 1.3% as the prices of base metals increased. A key US jobs report, which was expected today, will not be released because of the ongoing US government shutdown. Traders are now almost certain the Fed will cut rates later this month, a belief strengthened by a recent weak US private jobs report. Later in the day, investors will be looking at new economic data on services activity from across Europe.
On the FX front, the Japanese yen was slightly weaker on Friday, falling 0.3% against the dollar, but it is still heading for a strong week, marking its best gain since May.
Traders are carefully watching for any signals about future interest rate increases from the Bank of Japan, as well as a major political leadership election happening this weekend.
Meanwhile, the US dollar became a little stronger against a group of other major currencies, with the dollar index rising 0.1%. The euro was also up slightly, increasing 0.1% against the dollar, while the British pound remained steady.
The Canadian dollar struggled and was trading near a four-month low against the US dollar.
This weakness followed a more than 2% drop in oil prices on Thursday, which made investors nervous, along with ongoing concerns about the renewal of a major trade agreement between the US, Mexico, and Canada.
Currency Power Balance
