Global stocks scale fresh record highs with dollar posting gains
Stock prices across the world climbed to record highs on Tuesday on news euro zone business activity accelerated to a six-year high, while the dollar gained after hawkish comments from Federal Reserve officials.
The revived possibility of a US rate hike next month, together with demand for risky assets, weighed on gold prices. It also propelled bond yields higher before they retreated on safe-haven demand as polls showed anti-EU and anti-immigrant Marine Le Pen holding her lead in the first round of the French presidential election.
Oil futures rose after OPEC said it was sticking to its deal to reduce output.
The rally in equity markets around the globe, led by Wall Street, has been stoked by hopes of tax cuts, infrastructure spending and looser regulations from US President Donald Trump and a Republican-controlled Congress.
Details on US fiscal stimuli remained sketchy, but investors seemed patient for progress on these possible programmes as they have been assuaged by upbeat company results.
“There was a period last week, I think, where people were getting a little worried about whether the administration was getting sidetracked,” said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.
“A couple days later, those worries seem to have temporarily subsided,” Meckler said.
MSCI’s world stock index which tracks shares in 45 nations, rose 0.42 per cent to an all-time peak of 446.21.
On Wall Street, the Dow Jones Industrial Average rose 118.95 points, or 0.58 per cent, to finish at 20,743, the S&P 500 gained 14.22 points, or 0.60 per cent, to end at 2,365.38 and the Nasdaq Composite added 27.37 points, or 0.47 per cent, to close at 5,865.95.
The three US stock indexes touched fresh record highs boosted by strong earnings reports from Wal-Mart and other retailers.
Europe’s benchmark index of 300 leading shares touched its highest since December 2015, ended up 0.6 per cent at 1,471.87 points. Purchasing manager index (PMI) reports showed the euro zone economy expanding much faster and more smoothly than expected.
Earlier, stocks had traded lower after Europe’s biggest bank HSBC’s surprised with a 62-per cent drop in annual profits.
Stronger appetite for equities and chances of another US rate increase in the coming months lifted the dollar index by 0.46 per cent at 101.41.
Hawkish comments from Federal Reserve officials and European political uncertainty boosted the dollar and the greenback was on course for its steepest gain against the euro in two weeks.
Philadelphia Fed President Patrick Harker said on Tuesday he would likely support a quarter point rate increase at the central bank’s March 14-15 meeting if the economy improves further.
Cleveland Fed President Loretta Mester said late on Monday she would be comfortable raising rates if the economy maintained its current performance.
Interest rates futures implied traders saw a 22-per cent chance the Fed will raise rates next month, up from 18 per cent on Friday, CME Group’s FedWatch programme showed.
US financial markets were closed on Monday for Presidents Day.
US 10-year Treasury yield was fractionally higher at 2.433 per cent, while German 10-year Bund yield edged up 0.6 basis point at 0.305 per cent.
In the oil market, Brent crude finished 48 cents or 0.85 per cent higher at US$56.66 a barrel. US crude settled up 66 cents or 1.24 per cent at US$54.06.
Spot gold prices slipped 0.13 per cent, to US$1,236.60 an ounce.