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Wall Street inspires late rally in Europe

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·Senior City Correspondent, Yahoo Finance UK
·2-min read
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TOPSHOT - The New York Stock Exchange (NYSE) is pictures on May 26, 2020 at Wall Street in New York City. - Wall Street stocks surged early Tuesday on optimism about coronavirus vaccines as the New York Stock Exchange resumed physical floor trading for the first time since late March. About 30 minutes into trading, the Dow Jones Industrial Average was up 2.4 percent at 25,038.94.The broad-based S&P 500 gained 1.7 percent to 3,007.76, while the tech-rich Nasdaq Composite Index advanced 1.2 percent to 9,434.99. Analysts pointed to announcements by a number of companies pursuing vaccines for coronavirus, including Merck, which said it would acquire privately-held vaccine company Themis and disclosed new research ventures with other companies. (Photo by Johannes EISELE / AFP) (Photo by JOHANNES EISELE/AFP via Getty Images)
The S&P 500 held on to gains on Wednesday morning after closing at a record high on Tuesday. Photo: Johannes EiseleI/AFP via Getty Images

European stock markets finished Wednesday at their highest levels of the session, spurred on by continued momentum in US equity markets.

Major indexes across Europe started the day in the red but recovered as the session wore on. A solid open for Wall Street, where record closes had been set overnight, inspired a modest rally in the final few hours of trade.

The S&P 500 (^GSPC) and the Nasdaq (^IXIC) both closed at new record highs on Tuesday and pushed higher when trading began again on Wednesday.

The S&P 500 (^GSPC) was up 0.2% by the time Europe closed, while the Nasdaq (^IXIC) had gained 0.3% and the Dow Jones (^DJI) was up 0.3%. Apple became the first US company to reach a $2tn market capitalisation, boosting sentiment.

“Fresh record highs for the Nasdaq and S&P 500 helped lift the market’s overall mood on Wednesday,” said Connor Campbell, a financial analyst at trading platform SpreadEx.

The FTSE 100 (^FTSE) and the IBEX 35 (^IBEX) both ended the day up 0.6%, the DAX (^GDAXI) and the CAC 40 (^FCHI) rose 0.7%, and the FTSE MIB (FTSEMIB.MI) rose 0.9%.

Wednesday had little in the calendar for data and earnings across Europe. UK inflation, one of the few notable announcements, delivered a surprise rise to 1%.

READ MORE: UK inflation surged in July as lockdown measures were eased

Connor Beakey, an economist at Allied Irish Banks, said the record highs for US markets reflected “the unprecedented levels of fiscal and monetary stimulus.”

US stocks were also boosted by a continued slump in the dollar, which has driven investors out of cash and into equities. The US dollar index (DX=F) has fallen for five days in a row, hitting its lowest level since April 2018.

Chinese equities had slumped overnight. The Hong Kong Hang Seng (^HSI) fell 0.9%, the Shanghai Composite (000001.SS) dropped 1.2%, and the Shenzen Component (399001.SZ) lost 2%.

Jim Reid, a senior strategist at Deutsche Bank, said continued tensions between the US and China over trade were to blame.

“The US administration said that it wants university endowments to divest Chinese holdings, saying it would be ‘prudent’ to get ahead of potentially more onerous measures on holding the shares including a wholesale de-listing of PRC firms from US exchanges,” Reid wrote in a morning note to clients.

“The State Department letter also warned universities of China’s growing influence on campuses and said the US is accelerating investigations of what it called ‘illicit PRC funding of research, intellectual property theft and the recruitment of talent’.”

Elsewhere in Asia, Japan’s Nikkei (^N225) rose 0.2% and Australia’s ASX 200 (^AXJO) rose 0.7% overnight.

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