DM Monitoring
LONDON/TOKYO: Global shares approached record highs on Friday while the dollar and oil topped recent milestones, as progress in vaccine distribution and U.S. stimulus hopes prompted bets on further normalisation in the global economy.
An index of the world’s major 50 markets, MSCI ACWI, rose 0.25% to 668.4, coming within reach of a record high of 670.82 touched about two weeks ago. It was the fifth consecutive day of gains.
Oil hit its highest level in a year, above $59 a barrel, supported by hopes of a quicker economic revival and supply curbs by OPEC and its allies. The STOXX index of Europe’s 600 largest stocks was up 0.2% at 410.4, though slower vaccination rollout in continental Europe and disappointing industrial data from Germany tempered optimism.
Expectations of a large stimulus by U.S. President Joe Biden also supported risk sentiment. Better-than-expected data on U.S. job markets released in the past two days fanned further hopes of a strong payroll report due at 1330 GMT.
“The fact that U.S. stocks are hitting record highs is not just thanks to the vaccine rollout, but also expectations of fiscal stimulus as it looks as though the Democrats will go on their own and not compromise with Republicans on a smaller package,” said Philip Shaw, chief economist at Investec in London.
Longer-term U.S. Treasury yields rose in anticipation of a large pandemic relief bill from Washington as well as on heightening inflation expectations. The benchmark 10-year yield stood at 1.130%, having risen to a three-week high of 1.162% the previous day. The 30-year bonds yielded 1.922%, near its 10 1/2-month high of 1.951% touched on Thursday.
Bond yields rose in Europe as well, with Germany’s 30-year government bond yield climbing back into positive territory for the first time since September.
Germany’s DAX index was flat after data showed orders for German-made goods fell more than expected in December. MSCI’s gauge of Asian shares outside Japan rose 0.4% while Japan’s Nikkei rallied 1.5%.
A market gauge of future U.S. inflation was at its highest since October 2018. A similar gauge for the euro zone hit its highest since May 2019. While it was a strong day for conventional assets, the leading names in the recent U.S. retail-share trading fad fared worse.
The “Reddit rally” stocks GameStop and AMC Entertainment plunged further after two weeks of wild swings fuelled by the WallStreetBets Reddit forum.
