MSCI world stocks index at record high, dollar posts biggest gains in 10 days

LONDON: World shares returned to a record high yesterday, on relief that hurricane Irma looked to be losing strength in the United States and that North Korea’s anniversary celebrations at the weekend passed without any new missile test.

The MSCI All Country World Index, which tracks roughly 2,400 stocks in 47 countries, climbed to its latest peak as Europe’s insurers rose more than 2% on hopes Irma’s damage would not prove as costly as feared.

In New York, Wall Street opened sharply higher. The Dow Jones Industrial Average rose 157.28 points, or 0.72%, to 21,955.07.

As the start of US trading neared, Irma had weakened to a tropical storm and was expected to slow to a tropical depression by today.

The relief over North Korea and a weaker yen had also given Tokyo its best session since June in Asia, as investors began to lose their appetite for safer assets like gold and US Treasuries.

Winning a reprieve from risk aversion, the dollar registered its biggest gains in the currency markets in 10 days. It added 0.5% against its perceived safe-haven counterpart, Japan’s yen, and regained ground against the highflying euro as a top European Central Bank (ECB) policymaker cautioned against the single currency’s recent rise.

Tokyo’s Nikkei 225 had risen 1.4% after Pyongyang held a celebration to congratulate the nuclear scientists and technicians who steered the country’s sixth and largest nuclear test a week earlier.

Seoul’s main index added 0.8%, while MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.4%.

“It’s too early to say the (North Korean) risks are gone, but one thing for sure is that market players now think the situation won’t get worse as it did some weeks ago,” said Lee Kyung-min, a stock analyst at Daishin Securities in Seoul.

The dollar hovered at ¥108.50, up from Friday’s 10-month trough of ¥107.32. Against a basket of currencies, it added 0.15% to 91.490, still close to last week’s 2 -year low of 91.011.

The euro eased to US$1.2020, having hit a top of US$1.2092 on Friday amid speculation the ECB was closer to starting a wind-back of its stimulus programme.

China’s central bank was also a focus in Asia after it confirmed reports that it planned to scrap reserve requirements for financial institutions settling foreign exchange forward yuan positions with effect yesterday.

“The removal potentially makes it easier for traders to purchase the USD, easing the pressure for yuan appreciation,” analysts at ANZ said in a note. “The change likely signals some discomfort about the stronger yuan and its impact on Chinese exports.”

The dollar was up 0.3% against the offshore yuan at 6.5269 yuan, off a low of 6.4437. – Reuters