Global stocks reach a record high

Emerg­ing mar­ket shares ben­e­fit from weak dol­lar

The Star Early Edition - - INTERNATIONAL - John Ged­die

A WEAK US dol­lar com­bined with up­beat Chi­nese data to lift emerg­ing mar­ket and Asian shares to lev­els not seen in more than two years and global stocks to an all-time high yes­ter­day.

With the world’s most widely-used currency near 10-month lows, there has been an in­di­rect loos­en­ing of fi­nan­cial con­di­tions for emerg­ing mar­kets which also serves to sup­port riskier as­sets such as equities.

Af­ter de­cent gains in Asia on the back of pos­tive signs from global eco­nomic pow­er­house China this week, MSCI’s world stocks in­dex looked set for a ninth day of gains, which would mark its long­est win­ning streak since Oc­to­ber 2015.

“Most emerg­ing mar­kets are do­ing quite well at the mo­ment, es­pe­cially in Asia. The fig­ures for China are pos­i­tive,” said Mar­i­jke Zewuster, Head EM re­search, ABN Amro.

“If you look at the un­der­ly­ing fig­ures they are rel­a­tively strong at the mo­ment.”

The US dol­lar – which dropped sharply on Tues­day af­ter the col­lapse of a health­care bill dealt a blow to Pres­i­dent Don­ald Trump’s abil­ity to de­liver promised fis­cal re­forms – could muster lit­tle more than ten­ta­tive gains yes­ter­day.

Against a bas­ket of other ma­jor cur­ren­cies, it was up 0.3 per­cent at 94.878 points, but still down around 7 per­cent on the year and within sight of Tues­day’s low of 94.476 points.

An­a­lysts said the slight gains in the dol­lar were down to ex­pec­ta­tions that the Euro­pean Cen­tral Bank and the Bank of Ja­pan may strike dovish tones when they meet to­day, which could dent re­cent strength in the euro and the Ja­panese yen.

The ECB is ex­pected to ad­just their lan­guage, but sub­stan­tive changes to their pol­icy will likely come later in the year. The Bank of Ja­pan is ex­pected to raise its growth fore­cast, but cut its in­fla­tion out­look, un­der­lin­ing the cau­tious tone adopted re­cently by ma­jor cen­tral banks.

Boon to bonds

The euro inched down against the dol­lar, hav­ing made a 14-month top on Tues­day.

The di­min­ished prospect of fis­cal spend­ing in the US has been a boon to bonds, es­pe­cially as a run of soft US in­fla­tion read­ings had less­ened the risk that the Fed­eral Re­serve would need to be ag­gres­sive in re­mov­ing its stim­u­lus.

Yields were broadly lower across the eu­ro­zone for a sec­ond straight day yes­ter­day, with US Trea­sury yields trad­ing near three-week lows.

“The ques­tion marks over US re­form on the one hand, and the un­der­ly­ing eco­nomic growth mo­men­tum on the other hand are likely to keep the US within its cur­rent goldilocks sce­nario for longer,” wrote an­a­lysts at Mor­gan Stan­ley in a note.

While Euro­pean stocks made a mod­est 0.4 per­cent gain, sup­ported by a slew of up­beat earn­ings from firms, there were big­ger gains in Asia and emerg­ing mar­kets.

Those gains come on the back of data which showed China’s econ­omy ex­pand­ing at a faster-than-ex­pected 6.9 per­cent clip in the sec­ond quar­ter, set­ting the coun­try on course to com­fort­ably meet its 2017 growth tar­get.

Af­ter mak­ing de­cent gains on Tues­day, oil prices edged lower af­ter a rise in crude in­ven­to­ries and on­go­ing high out­put from Opec pro­duc­ers. – Reuters


An elec­tronic stock board in Tokyo yes­ter­day. Asian shares lifted to lev­els not seen in more than two years.

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