Global shares hit peak, oil up on Middle East tensions

Global shares rose for the 11th day in a row to reach a peak on optimism about the rollout of COVID-19 vaccines and new fiscal aid from Washington, while tensions in the Middle East drove oil to a 13-month high.

As more people are vaccinated across key markets such as the United States, and with U.S. President Joe Biden looking to pump an extra $1.9 trillion in stimulus into the economy, the so-called reflation trade has gathered steam in recent days.

On Friday, The Cboe Volatility Index, known as Wall Street's "fear gauge", ended at its lowest level for nearly a year, helping drive a 0.3% gain for MSCI's broadest measure of world stocks on Monday. Taking its cue from a stronger, albeit holiday-thinned, Asian session, Europe's major indexes were a sea of green in early deals, with Britain's FTSE 100 up 1.3%.

With China and Hong Kong markets closed for the Lunar New Year holiday, Japan's Nikkei led the way, climbing 1.9% to reclaim the 30,000-point level for the first time in more than three decades. E-mini futures for the S&P 500 were also higher, up 0.4%, although U.S. stock markets will be closed on Monday for the Presidents Day holiday.

Later in the week, all eyes will be on the release of minutes from the U.S. Federal Reserve's January meeting, where policymakers decided to leave rates unchanged, for hints to the likely direction of monetary policy. Those concerned about the impact of market exuberance on the outlook for inflation will also have fresh data to parse, with Britain, Canada and Japan all due to report. Friday will also see major economies, including the United States, release preliminary February purchasing managers' indexes (PMI).

"We believe investors should prepare for bouts of volatility ahead, but regard them as opportunities rather than threats," said Mark Haefele, chief investment officer at UBS Global Wealth Management. "We recommend investors stick to their long-term financial plans, and continue to put excess cash to work." Oil joined equity markets in pushing higher, reaching its highest level since January 2020 on hopes U.S. stimulus will boost the economy and fuel demand and after a Saudi-led coalition fighting in Yemen said it intercepted an explosive-laden drone fired by the Iran-aligned Houthi group. Brent crude rose 1.3% to $63.24 a barrel. U.S. crude oil gained 1.9% to $60.58, just off earlier highs.

With risk assets in favour, safe havens dipped, with gold down 0.3% to $1,817 an ounce. Ten-year German bond yields also rose to their highest since September, up 4 basis points at 0.387%.The dollar remained near twoweek lows as traders took a more cautious view of the pace of the U.S. economy's rebound. Against a basket of currencies it was last down around 0.1%.Bitcoin, meanwhile, recovered some of its overnight weakness to trade down 2.3% at $47,550.76, below a record high of $49,714.66.

Oil prices soared on Monday to their highest in about 13 months as vaccine rollouts promised to revive demand and producers kept supply reined in. Brent crude was up 77 cents, or 1.2%, at $63.20 a barrel at 0955 GMT, after climbing to a session high of $63.76, the highest since Jan. 22, 2020.

U.S. West Texas Intermediate (WTI) crude futures gained $1.04, or 1.8 %, to $60.51 a barrel. It touched $60.95 - its highest since Jan. 8 last year, earlier in the session. Oil prices gained around 5% last week. Prices have rallied over recent weeks as supplies tighten, due largely to production cuts from the Organization of the Petroleum Exporting Countries (OPEC) and allied producers in the group OPEC+.

Russian Deputy Prime Minister Alexander Novak said the global oil market is on a recovery path and the oil price this year could average $45-$60 per barrel. "We've seen low volatility in the past few months. This means the market is balanced and the prices we are seeing today are in line with the market situation," Novak was quoted as saying.

Meanwhile U.S. President Joe Biden pushed for the first major legislative achievement of his term on Friday, turning to a bipartisan group of local officials for help on his $1.9 trillion coronavirus relief plan. "The longawaited $1.9 trillion package has not been passed.