European Stocks Called Higher as China GDP Data Extends Global Equity Rally – TheStreet.com

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European stocks are set to open higher Monday after stronger-than-expected economic data from China added new momentum to the a global equity rally that has taken markets to record highs.

Britain’s FTSE 100 is expected to add around 0.4% at the opening bell, according to financial bookmakers IG, with modestly smaller gains anticipated for markets in Germany, France and Switzerland.

China’s economy grew at a 6.9% pace in the three months ending in June, officials indicated Monday, thanks to stronger industrial output and export data.

The reading carried regional stocks, in the form of the MSCI Asia ex-Japan index, past a two-year high and extended the recent global rally into its second week.

Investors have been buoyed by speculation that central bank signalling of faster interest rate increases may have been misinterpreted, given that Federal Reserve Chair Janet Yellen appeared to suggest that current rates won’t have to rise “all that much further” based on the pace of inflation and the balance of strength in the labor market.

That theory could be tested later this week in Frankfurt with the next rate-setting meeting of the European Central Bank. Bond markets around the region have been bracing for a change in the Bank’s E2.3 trillion quantitative easing program, with yields on benchmark 10-year German government bonds rising to an 18-month high of 0.58% last week.

However, given the tepid pace of inflation in the currency area, as well as falling energy prices, investors are now shifting expectations towards a more dovish statement from ECB President Mario Draghi this week that could put downward pressure on the euro — which traded at 1.1465 overnight, near the highest level in 14 months — but support regional equity gains.