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GLOBAL MARKETS-Central bank caution beefs up stock gains

Published 20/06/2017, 07:07 pm
© Reuters.  GLOBAL MARKETS-Central bank caution beefs up stock gains
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* Nikkei surges more than 1 percent, European markets up

* Tech rebound cools concerns over sector of last fortnight

* Fed's Evans says can wait till end of year before thinking again

* Sterling hit by BoE chief Carney's comments on interest rates

* Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh

By Patrick Graham

LONDON, June 20 (Reuters) - Japan's Nikkei .N225 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 percent 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 .N225 closed 0.8 percent higher on the day, having earlier gained more than 1 percent.

European markets gained between a quarter and half a percent in early trading .GDAXI .FCHI .FTSE FTEU3 .

The technology sector which has led U.S. stock market gains this year, fell for a second week last week .SPLRCT but they saw a strong rebound on Monday that helped push Wall Street indexes .SPX .DJI 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. GBP=D3

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets

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