Germany’s DAX raced to new record highs on Monday as European stocks extended their recent sharp rally as investors bet the weakened euro would boost the region’s economy and lift exporter earnings.
The European rally also pushed up Switzerland’s SMI equity index back near levels last seen in January, before a slump in that index caused by a surge in the franc after the Swiss National Bank (SNB) abandoned a three-year peg holding the value of its currency to 1.20 francs per euro, Reuters said.
The DAX – which unlike many other European equity indexes factors in returns from dividends – rose 1.6 percent to 12,088.68 points, smashing through the 12,000-point level for the first time.
The pan-European FTSEurofirst 300 index rose 0.7 percent to 1,589.57 points, its highest since late 2007.
The DAX and other European stock markets have been lifted by the European Central Bank’s launch of a trillion euro money-printing scheme aimed at boosting economic growth in Europe.
Euro Drops
The quantitative easing program has weakened the euro and pushed bond yields to new historic lows, driving investors to seek the better returns available from the stock market.
Although the single currency recovered slightly on Monday, it has still lost about 25 percent of its value against the US dollar since May last year.
“The unrelenting rally in European shares continues, helped by the weak euro and improving economic data. There is no reason right now to lighten up, and I continue to be a buyer,” said Hampstead Capital hedge fund manager Lex Van Dam.
Siemens Surges
Siemens was one of the top DAX performers, rising 2.1 percent to its highest level in around seven years after the German engineer won some Egyptian contracts.
Shares in Lafarge fell 4.6 percent and Holcim dipped 1 percent, however, as the two cement majors argued over the terms of their planned merger.
Many investors were looking towards the US Federal Reserve’s two-day meeting beginning on Tuesday.
After successive months of strong jobs data, expectations have been growing that the Fed will point towards a June rate rise. Those expectations have strengthened the US dollar, causing some investors to fret about the potential impact on US corporate earnings compared with those in Europe.
“While the lower euro helps boost European stocks, it really is the strong dollar that has been sending US shares lower. We could soon see analysts starting to forecast negative US earnings growth for 2015,” said Mirabaud Securities’ senior equity sales trader John Plassard.
