Global shares near record levels

Lawrence White and Hideyuki Sano
·4-min read

Global shares approached record highs on Friday and the dollar headed for its best weekly gain in three months, as progress in vaccine distribution and US stimulus hopes prompted bets on further normalisation in the global economy.

An index of the world's major 50 markets, MSCI ACWI , rose 0.2 per cent to 667.9, coming within reach of a record high of 670.82 touched about two weeks ago. It was the fifth consecutive day of gains.

The STOXX index of Europe's 600 largest stocks was up 0.2 per cent at 410.4, though slower vaccination rollout in continental Europe compared with Britain and the United States tempered optimism.

MSCI's gauge of Asian shares outside Japan rose 0.4 per cent while Japan's Nikkei rallied 1.5 per cent.

Expectations of a large stimulus by US President Joe Biden's administration also supported risk sentiment while better-than-expected data on US job markets released in the past two days fanned further hopes of a strong payroll report due at 1330 GMT.

"The fact that US 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.

On Wall Street, each of the major indexes rose more than 1 per cent on Thursday, with the Nasdaq Composite Index and S&P 500 setting record highs.

Longer-term US 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 per cent, having risen to a three-week high of 1.162 per cent the previous day while the 30-year bonds yielded 1.922 per cent, near its 10 1/2-month high of 1.951 per cent 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.

A market gauge of future US inflation was at its highest since October 2018 while that for the euro zone hit its highest since May 2019.

It was bad news, however, for the internet's new favourite shares, as the "Reddit rally" stocks GameStop and AMC Entertainment plunged further after two weeks of wild swings fuelled by the WallStreetBets Reddit forum.

The dollar headed for its best weekly gain in three months, lifted by growing confidence that the US economic recovery will outpace global peers.

The US currency's bounce confounded dollar bears and traced a trading pattern known as the "Dollar Smile" which has in previous years preceded major US economic rebounds and currency surges.

The US dollar index stood near a two-month high, having risen 1.1 per cent so far this week, on course for its biggest weekly increase since late October.

The euro changed hands at $US1.1964 ($A1.5761), having hit a two-month low of $US1.1952 ($A1.5745) while the yen hit a 3-1/2-month low of 105.70 per dollar.

"It seems markets are now trying to trade on economic normalisation based on progress in vaccination," said Arihiro Nagata, general manager of global investment at Sumitomo Mitsui Bank.

"The fact that the only currencies that are doing better than the dollar over the past two days are the British pound and the Israeli shekel, the two countries that are going further ahead in vaccination, seems to support that."

The British pound stood at $US1.3678 ($A1.8019) not far from its 2-1/2-year peak of $US1.3759 ($A1.8126) hit late last month.

The shekel rose over the past two days, reversing its decline since mid-January after the Bank of Israel intervened to stem the currency's strength after it had hit a 24-year high.

Strength in the dollar pushed gold to a two-month low of $US1,785.10 ($A2,351.63) per ounce on Thursday. The metal was last traded at $US1,797.40 ($A2,367.83).

Oil prices extended gains on the upbeat economic mood, falling inventories and the OPEC+ decision to stick to its output cuts.

US crude rose 0.6 per cent to $US56.6 ($A74.6) per barrel and Brent was at $US59.14 ($A77.91), up 0.5 per cent.