World stocks hit record high as upbeat data boosts confidence

TOKYO: Global stocks hit a record high on Friday and Asian markets rose to their best levels in more than two years as upbeat data on US manufacturing and employment and buoyant European factory growth boosted investor optimism.

The MSCI, an index of 46 stock markets in the world, rose 0.2 per cent to a record high. It was on track for a gain of 0.6 per cent for the week and close to 11 per cent for the year to date.

European shares were also expected to advance, with spread-betters looking at gains of 0.6 to 0.7 per cent for Germany’s DAX, France’s CAC and Britain’s FTSE.

MSCI’s broadest index of Asia- Pacific shares outside Japan gained 0.6 per cent, while Japan’s Nikkei rose 1.6 per cent, topping the psychologically important 20,000-point mark and taking the benchmark to its highest level since August 2015.

“Market sentiment is very good. The strength in Wall Street shares will be a tailwind for the Nikkei as well,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

Wall Street’s volatility index, which measures implied volatility of stocks and is often seen as investors’ fear gauge, fell below 10, near a decade-low touched last month, in another sign of investors’ confidence that markets will be stable at least for the time being.

The Institute for Supply Management said its barometer of US factory activity edged up to 54.9 last month from 54.8 in April, while ADP reported private payrolls grew by 253,000 last month, beating analysts’ median forecast of a 185,000 increase.

Those numbers offset weakness in auto sales and set markets up for solid government payroll data due at 1230 GMT.

“The US slowdown in the first quarter was due to soft consumption. But consumer spending has started to recover already in March,” said Haruka Kazama, senior economist at Mizuho Research Institute.

“Labor market conditions are improving as we can see from yesterday’s ADP data, which also supports consumption.”

Following the latest data, the Atlanta Federal Reserve upgraded its closely-watched GDP Now forecast for April-June growth to a 4.0 per cent annualised pace from 3.8 per cent.

Further signs of solid US growth led traders to almost fully price in the chance that the Federal Reserve will raise interest rates at its June 13-14 policy meeting. They also supported the outlook for possibly another hike by the year-end, likely in September.

That helped the dollar recover in the foreign exchange market, although traders said concerns about U.S. politics could cap its gains.

Former FBI Director James Comey will testify next Thursday before a US Senate panel investigating Russia’s alleged meddling in the 2016 US election, in a hearing that could add to difficulties facing President Donald Trump.

“People may be waiting for the payroll data. Or they may be looking beyond that and want to focus on political instability and next week’s testimony,” said Kyosuke Suzuki, director of forex at Societe Generale. — Reuters