Global stocks soar to record highs

WORLD stocks hit record highs yesterday and the dollar dipped after the US Federal Reserve signalled caution in raising interest rates, while oil prices rose in anticipation of top producers agreeing to extend output cuts for up to a year.

European shares opened higher, but quickly dipped into negative territory. The pan-European STOXX 600 Index was down 0.3 percent, led lower by resources companies after a 4 percent drop in iron ore on China’s Dalian Commodity Exchange.

Earlier, Asian stocks, as measured by MSCI gained almost 1 percent to a two-year high after the US S&P 500 Index hit a closing record on Wednesday. This helped push MSCI’s 46-country world stock index to a record high of 464.38 percent, up 0.3 percent on the day.

E-mini index futures cated Wall Street would open higher while the VIX “fear gauge” of expected volatility in the S&P 500 opened at 9.82, its lowest since May 10.

Brent crude oil rose 55 cents, or more than 1 percent to $54.55 (R705.66) a barrel ahead of a meeting in Vienna, where Opec and non-member oil producers are expected to extend output cuts for at least nine and possibly 12 months. Oil production James Woods, analyst at Rivkin Securities, said an extended production cut was already “factored into the price of oil”.

“Opec officials prefer… to wait and see the impact of an extension in helping rebalance the market prior to taking any more drastic actions,” he said.

However, the main factor in markets overnight was the minutes of the Fed’s May 2-3 meeting. They showed policymakers agreed they should hold off on raising rates until it was clear a recent slowdown in the US economy was temporary, though most said a hike was coming soon.

Fed staff proposed a plan to wind down the more than $4 trillion of debt securities amassed as part of efforts to stimulate the economy. In a move some investors cited as reassuring, the plan included a limit on how much would be allowed to fall off the balance sheet each month.

Federal funds futures imply traders see an 83 percent chance of a rate rise in June and a 46 percent probability of two increases by the end of 2017, according to the CME Group’s FedWatch tool.

US Treasury yields dipped after the minutes, weakening the dollar. The benchmark 10year yield was down 1 basis point yesterday at 2.26 percent.

Euro zone borrowing costs also fell after what was seen as a sign that central banks would be wary of stepping back too quickly. – Reuters