Robust earnings drive European shares to 2-week high

Global stocks started the new month on a firm ground on Thursday after a brutal October, while sterling rallied on reports that Britain and the European Union are close to a post-Brexit deal on financial services. The MSCI All-Country World Index, which tracks stocks in 47 countries, was up 0.3 per cent on the day.

October was the index's worst month since May 2012 - a loss of 7.5 per cent - as shares globally took a battering on a number of factors ranging from trade wars to concerns about the global economy and higher US interest rates.

European markets followed a strong start in Asia, with robust company earnings helping the pan-European STOXX 600 index hit a two-week high.

Britain's FTSE 100 however fell 0.1 per cent as the pound strengthened on a report Britain and the EU are close to a deal that would give financial services firms in the UK continued access to European markets once Brexit happens.

“This is a significant development for the pound as it alleviates some market concerns on how London would finance its big current deficit,” said Ulrich Leuchtmann, a currency strategist at Commerzbank.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.7 per cent, adding to modest gains the previous day. The index had fallen 10.2 per cent in October, its worst monthly performance since August 2015.

The improved mood had filtered down to Asia from Wall Street, which rose for a second day on Wednesday as strong company results and bargain hunting of beaten-down technology and internet favourites lifted spirits.

Hong Kong's Hang Seng rose 1.5 per cent on Thursday and the Shanghai Composite Index climbed 0.2 per cent. Japan's Nikkei bucked the trend and slipped 1 per cent following two days of big gains.

“What we are seeing is the equity markets trying to rebound after bottoming out. Corporate earnings in the US and Japanese markets have been relatively strong on the whole, which means there are plenty of bargain-hunting opportunities,” said Soichiro Monji, senior economist at Daiwa SB Investments in Tokyo.

Risk sentiment recovers

In currencies, sterling's rally nudged the dollar off its recent peak. The index measuring the greenback's strength against a basket of six major currencies was down 0.6 per cent at 96.539.

The index had spiked to a 16-month high of 97.20 overnight on a ADP national employment report showing US private sector payrolls increased by the most in eight months in October. The dollar has enjoyed a boost from robust data, including last week's GDP numbers which showed the US economy slowed less than expected in the third quarter.

The Australian dollar and the Kiwi dollar were up 1.2 per cent and 1.4 per cent, respectively after strong domestic trade data helped offset some of the concerns about slowing growth in China - Australia's biggest trading partner.

“We've got a reasonably risk-friendly market, and with the new month we have some dollar selling,” said Kit Juckes, a strategist at Societe Generale.

In another sign risk sentiment was improving, Scandinavian currencies - the Norwegian crown and Swedish crown - rallied as well. The euro rose over half a per cent to $1.1376 after retreating to $1.1302 on Wednesday, its lowest since mid-August. The single currency has been weighed by less-than-stellar economic news from the euro zone.

In commodities, U.S. crude futures were down 0.86 per cent at $64.75 per barrel and Brent crude lost 1.13 per cent to $74.19 per barrel. The two benchmarks remained on the back foot after falling more than $10 from a four-year peak reached early in October as broader market ructions were seen hurting demand for fuel.