Stocks smash new records as party rolls on

LONDON: World stocks hit fresh highs yesterday with European markets joining the party as early indications suggest 2018 will be another year of synchronized global growth led by a robust European economy.

After its biggest one-day gain in more than two weeks on Tuesday, and in the wake of its best year since 2009 in 2017, MSCI’s index of global stocks, which tracks shares in 47 countries, pushed on to new record highs. The pan-European stock index was 0.2 percent higher following gains for their Asian and US counterparts overnight as manufacturing surveys pointed to a strong start for the European economy.

The single currency was holding near a four-month high of $1.2081 hit on Tuesday. “Investors have woken up in the new year and looked forward to another firm year for global growth with very muted downside risk,” said Investec economist Philip Shaw. But he warned against reading too much into the first two trading days of the new year.

“The converse is the sell-off in bond markets: the idea that inflation pressures may be firmer than expected and central banks could take a slightly more aggressive approach than previously thought,” Shaw added. ECB rate-setter Ewald Nowotny told a German newspaper that the European Central Bank may end its stimulus program this year if the euro zone economy continues to grow strongly.

Earlier in the session, Asian stocks struck a range of new peaks: a record high for Philippine stocks, a 24year top for Thailand and a decade-high for Hong Kong.

MSCI’s index of Asia-Pacific shares outside Japan rose 0.4 percent, having jumped 1.4 percent on Tuesday in its best performance since last March.

This came after Wall Street started the new year as it ended the old, scoring another set of record closing peaks. The Dow rose 0.42 percent, while the S&P 500 gained 0.83 percent and the Nasdaq 1.5 percent. The gains in riskier assets came as industry surveys from India to Germany to Canada showed quickening activity.

“The breadth of the recovery is extraordinary,” said Deutsche Bank macro strategist Alan Ruskin, noting that of 31 countries covered, only three failed to show growth while all the largest manufacturing sectors improved.

Elsewhere, spot gold reached its highest since mid-September at $1,321.33, before edging back to $1,317.32 per ounce. Oil prices surged again, inching towards 21/2 year highs hit on Tuesday as strong demand and ongoing efforts led by OPEC and Russia to curb production tightened the market. Brent crude futures was up 0.6 percent at $67 a barrel, while US crude futures shot up 0.8 percent to $60.87 a barrel.

Retailers stole the spotlight among UK stocks yesterday after Next delivered a strong Christmas update, as the FTSE 100 edged down from record highs. Britain’s main stock index dipped 0.1 percent, weighed down by financials stocks and consumer staples.

Next shone, however, jumping 8 percent to the top of the index after its trading update surprised investors, with a sales beat driving the company to upgrade its full-year profit forecast. Cheery results from the first UK retailer to report on the crucial Christmas season caused a rally in retail stocks across the market, delivering relief to investors in a sector faced with significant challenges.

Next’s update was in stark contrast to the start of 2017 when the retailer issued a profit warning and its shares sank. Yesterday gain brought it back to November levels before a third-quarter sales miss. “The Next share price rollercoaster continues,” said Mike van Dulken, head of research at Accendo Markets.

“Management’s update-by-update tinkering of guidance and sharp share price reactions only goes to reinforce how shareholders remain at the mercy of the UK consumer from one season to the next and exposed to short-termism.”

The main non-food retailers drove the market, with Marks & Spencer up 2 percent while Primark owner ABF gained 2.6 percent. Mid and small-caps also jumped on the retail rally and the more domestically-focused indexes rose 0.2 percent each.

Fashion retailer N Brown rose 7 percent to the top of the FTSE 250, and shares in small-cap department store Debenhams rose 3.8 percent.