World stocks climb as economic confidence rises

World markets had a swagger about them yesterday as upbeat economic data and signs of a revival in inflation pushed up stocks and commodity prices and kept the dollar at a nine-month high. Wall Street was set to tick higher with consumer confidence figures due and analysts already tucking into healthy-looking earnings from Procter & Gamble, General Motors and drugs giant Merck, but also a profit downgrade from Caterpillar.

Europe had been cheered as Germany’s Dax hit its highest level of the year after the closelywatched Ifo survey beat expectations a day after purchasing manager numbers had done the same. The region’s mining firms were the standout performers though. They hit a 14-month top as zinc surged to a five-year peak and iron ore reached its highest since mid-2014, all of which should pick up the pulse of inflation globally. “We are seeing a pick-up of economic activity against the backdrop of only one central bank - the Fed that is likely to tighten policy and that is supporting asset markets,” said CMC Markets senior analyst Michael Hewson.

Dollar takes breather

In foreign exchange markets, the dollar took a breather having reached its highest since early February against other top currencies as traders continued to add to the bets on a December US interest rate rise. China’s yuan went the other way, hitting its lowest since “offshore” trading was introduced in 2010 as Beijing nudged down official rates again. It traded as soft as 6.7882 yuan per dollar. The currency’s fall of more than 1.5 percent since the end of September has stirred renewed suspicion of a possible extended slide in the yuan, even though officials have reiterated their expectations for a stable currency. But the weakness has revived memories of a shock yuan devaluation last August and another rapid depreciation early this year - falls that triggered a bout of global market turmoil. Analysts pointed out, however, that during this round of yuan weakness, global risk sentiment was holding up. “That highlights the extent to which dollar gains are unlikely to be as extended as they were (in the past),” said BNP Paribas currency strategist Sam Lynton-Brown, in London.

The cheer around the mining sector was increased further as a production update thrust London-listed giant Anglo American’s shares up over 3 percent to take their gains this year to almost 270 percent. The staggering rise has made Anglo the top performing stock on Europe’s STOXX 600 this year. In Asia, Japan’s Nikkei rose 0.7 percent to close at a six-month high as a softening yen burnished the outlook for the country’s exporters. Australian stocks added 0.6 percent and Taiwan 0.7 percent.

Wall Street was taking encouragement from upbeat corporate results. Over one third of US companies have now reported and 80 percent have beaten market expectations. Another third of the S&P 500 components are scheduled to report earnings later this week, including heavyweights Apple , Alphabet, Amazon and Boeing.

Merger and acquisition activity added extra fizz in the wake of AT&T Inc’s $85.4 billion bid for Time Warner Inc , though the deal seemed destined to face stringent scrutiny from regulators. Safe-haven bonds were feeling the strain of the bullish mood elsewhere with US Treasury yields up to almost 1.78 percent again and European yields creeping higher.

The dollar rose in Asia yesterday as the chances of an interest rate hike were further boosted, while most stock markets recovered from early losses to track a Wall Street lead higher. US markets rallied Monday on the back of another upbeat round of corporate earnings and a provisional reading that showed activity in the US manufacturing sector expanded at a faster rate than expected. That came as St. Louis Federal Reserve President James Bullard said December was “most likely” the best time for a tightening of borrowing costs. And Fed Bank of Chicago President Charles Evans said he saw three hikes by the end of next year. “Bullard did not mince words and explicitly gave the green light for a December lift-off, but suggested that the longer term rate cycle is much lower,” Stephen Innes, a senior trader at OANDA, said in a note. The Fed meets next month but is expected to stand pat as that comes just days before the presidential election. In afternoon Asian trade, the dollar bought 104.45 yen, up from 104.21 yen in New York, while the pound also retreated against the US unit and the euro was virtually unchanged. Most other Asia-Pacific currencies also weakened, with the South Korean won down 0.3 percent and Australian dollar 0.1 percent off. The Canadian dollar was also down on expectations that a free-trade deal with the EU was on the verge of collapse despite seven years of talks. —Agencies