Mark Carney's comments on Brexit and rates drive pound lower
LONDON - Japan's Nikkei jumped to a near two-year high on Tuesday and European stock markets built on their biggest one-day gain in two months as central bankers gave a tempered message about growth and the chances of rises in interest rates.
Bank of England Governor Mark Carney, fresh from a meeting which saw three colleagues on the bank's policy committee vote for higher rates, knocked half a per cent off Britain's pound by saying "now was not the time" to adjust borrowing costs.
Similarly, in a speech late in U.S. time on Monday, Chicago Federal Reserve President Charles Evans said it may be worthwhile for the U.S. central bank to wait until year-end to decide whether to raise rates again.
After jitters on hi-tech stocks this month, that leaves markets confident that major central banks will not be tightening the flow of cash which has kept markets rising for eight years, at a time when growth globally looks solid.
"Companies are in aggregate in robust health, and with all the cash from quantitative easing still washing around the system, there is a lack of alternatives for investors to put their money in," said Andy Sullivan a portfolio manager with GL Asset Management UK in London.
"Low rates - and the negative return on cash that they continue to generate - just sustain that dynamic."
The Nikkei closed 0.8 per cent higher on the day, having earlier gained more than 1 per cent.
European markets gained between a quarter and half a per cent in early trading.
The technology sector which has led U.S. stock market gains this year, fell for a second week last week but they saw a strong rebound on Monday that helped push Wall Street indexes to record highs.
"Hi-tech shares just went through a correction," said Mutsumi Kagawa, chief global strategist at Rakuten Securities.
"Valuation is not that expensive, standing far below their levels at the peak of the dot-com bubble ... Given that their profits are expected to see exponential growth in coming years, it is premature to say the rally in hi-tech shares is over."
The votes for higher rates at the Bank of England's meeting last week propped up the pound after an almost 3 cent fall on the back of surprise election results two weeks ago.
But Carney, in a speech delayed from last week due to fire in London, played down the chances of any swift move at a time when the hard data on the UK economy has been worsening.
The pound hit a one-week low of $1.2671 after his comments on rates.