Wall Street quar­tet lifts world stock mar­kets

Kuwait Times - - BUSINESS -

World stocks rode the slip­stream of the first joint all-time high for Wall Street’s four main mar­kets since 1999 yes­ter­day, with com­mod­ity firms adding ex­tra lift as they eyed an OPEC oil out­put cut and surge in US build­ing un­der Don­ald Trump.

A pow­er­ful earthquake hit­ting the same part of Ja­pan that suf­fered a nu­clear dis­as­ter in 2011 nudged up the safe-haven yen and cooled the dol­lar’s re­cent 10 per­cent gain which had lifted it to a 13-1/2 year high in re­cent days. A sus­tained rally in oil and met­als helped the likes of the Aus­tralian and Cana­dian dol­lars as US stock in­dex fu­tures also pointed to an ex­ten­sion of Wall Street’s post-US elec­tion rally af­ter its 16year mile­stone on Mon­day.

“The fact Trump was elected means it is now seen as cer­tain that you will see a rise in in­fla­tion and that the Fed is go­ing to hike rates,” said Nataxis head of eq­ui­ties strat­egy Syl­vain Goyon. “Some of his strate­gies are re­ally pro-growth.” Asia’s top bourses had made solid gains overnight de­spite the clear­est sig­nal yet from US Pres­i­dent-elect Trump that he will shake up trade with the re­gion.

Europe also spent the day on the front foot, with Lon­don’s FTSE, Frankfurt’s DAX and the CAC 40 in Paris up be­tween 0.6 - 0.8 per­cent ahead of US trad­ing. The Euro­pean ba­sic re­sources in­dex, which has now dou­bled from its Jan­uary lows, was the best per­form­ing sec­tor as big names An­glo American, BHP Bil­li­ton and Antofa­gasta jumped 4 to 5 per­cent.

Hav­ing surged 4 per­cent on Mon­day, oil prices were nudg­ing $50 a bar­rel again. Rus­sian Pres­i­dent Vladimir Putin raised hopes that pro­duc­ers will agree to limit out­put at an OPEC meet­ing next week.

Bench­mark bonds mean­while were tak­ing a break from the surge in yields and plunge in prices since Trump’s un­ex­pected vic­tory ear­lier this month. The dif­fer­ence be­tween Ger­man and US bond yields were back near multi-decade ex­tremes af­ter two of Euro­pean Cen­tral Bank’s top pol­i­cy­mak­ers reaf­firmed the bank’s com­mit­ment to its mass stim­u­lus pro­gram ahead of a flagged re­view next month.

“The re­turn of in­fla­tion to­wards our ob­jec­tive still re­lies on the con­tin­u­a­tion of the cur­rent, un­prece­dented level of mone­tary sup­port, in spite of the grad­ual clos­ing of the out­put gap,” ECB Pres­i­dent Mario Draghi told a hear­ing in Stras­bourg. The bank is also likely to be wary about the un­cer­tainty if Italy’s govern­ment, as opin­ion polls cur­rently sug­gest, loses a ref­er­en­dum on con­sti­tu­tional changes days be­fore the ECB meets.

The dol­lar was be­gin­ning to claw higher as New York FX trad­ing re­sumed. It was back level against the yen at 110.85 and was on top again against the euro and ster­ling at $1.06 per euro and $1.2427 to the pound. Bri­tish fi­nance min­is­ter Philip Ham­mond got some rare good news about the coun­try’s fi­nances yes­ter­day as he fi­nal­izes his first bud­get state­ment, which is still likely to fore­cast a surge in bor­row­ing as Bri­tain pre­pares to leave the EU.

Breaking with a pat­tern of bor­row­ing over­shoots ear­lier in the fi­nan­cial year, of­fi­cial fig­ures showed public bor­row­ing in Oc­to­ber was 25 per­cent less than a year ear­lier at 4.8 bil­lion pounds ($6.0 bil­lion), its low­est since 2008 and beat­ing all economists’ forecasts.

Out­lin­ing plans on Mon­day for his first day in of­fice next year, Trump pledged to with­draw from the TPP Asia-Pa­cific free trade ac­cord. Such a move may lead to re­tal­i­a­tion by trade part­ners such as China and could po­ten­tially de­rail mar­kets, Libby Cantrill, head of public pol­icy at bond gi­ant PIMCO, said.

But for now, ex­pec­ta­tions that his ad­min­is­tra­tion will adopt ex­pan­sion­ary fis­cal poli­cies have pushed de­vel­oped mar­ket stocks higher and even emerg­ing mar­ket shares seem to have set­tled over the last week, hav­ing ini­tially been hit hard. Overnight, MSCI’s broad­est in­dex of Asia-Pa­cific shares out­side Ja­pan rose 1.3 per­cent, pulled up by a 1.3 per­cent rally in Aus­tralian shares. Korean shares and Hong Kong stocks rose 0.9 and 1.3 per­cent each. In­vestors in Ja­panese stocks ap­peared un­fazed by yes­ter­day’s big earthquake near the 2011 Fukushima dis­as­ter site in north­ern Ja­pan, with the bench­mark Nikkei av­er­age clos­ing up 0.3 per­cent.

The 7.4 mag­ni­tude shock had briefly dis­rupted cool­ing func­tions at a nu­clear plant and gen­er­ated a small tsunami. “Most of the flow into stocks seems to be re­tail-ori­ented with in­sti­tu­tional in­vestors pre­fer­ring to sit out the rally un­less they get a clearer pic­ture on Trump’s eco­nomic team,” said An­drew Sul­li­van, man­ag­ing di­rec­tor, sales trad­ing at Haitong In­ter­na­tional Se­cu­ri­ties Group in Hong Kong.

The dol­lar’s mild weak­ness propped up gold prices with spot gold up 0.2 per­cent at $1215 per ounce. Gold prices have fallen 10 per­cent since the US elec­tion out­come.

It also helped emerg­ing mar­ket cur­ren­cies trim some losses af­ter a re­cent bat­ter­ing. The Chi­nese yuan re­bounded from a near 8-1/2 year low hit on Mon­day and emerg­ing mar­ket eq­ui­ties rose more than one per­cent to 11-day highs. With mar­kets mov­ing higher, volatil­ity in­di­ca­tors re­ceded. The CBOE Volatil­ity In­dex, a so-called “fear gauge”, fell 3.4 per­cent.

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