Stocks set for best week since 2011

Dollar hits lowest since 2014 as VIX hovers below 20 and MSCI’s world index of stocks rises 0.3%

World shares were set for their best week of gains in six years yesterday after two consecutive weeks in the red, shrugging off a rise in global borrowing costs while the dollar hit its lowest since 2014.

MSCI’s world index of stocks, which tracks shares in 47 countries, was up 0.3 per cent. After suffering its biggest weekly drop since August 2015 last week, the index was on track for its best showing since early December 2011.

London was 0.6 per cent higher in afternoon trading, despite a disappointing increase of just 0.1 per cent in retail sales last month, after a revised 1.4 per cent fall in December.

In the Eurozone, France’s CAC 40 rose by 0.9 per cent and the DAX 30 in Frankfurt added 0.3 per cent. The panEuropean benchmark was up 3 per cent last week, set for its best week since December 2016, but still down around 6 per cent from the 2-1/2-year peak it hit in January.

Trading was generally subdued in Asia as many markets, including in China, Hong Kong and South Korea, were closed for the Chinese New Year break.

But Tokyo’s benchmark Nikkei 225 index gained 1.2 per cent.

Wall Street stocks opened slightly lower, with the Dow shedding 0.2 per cent in the first minute of trading.

Yields across the euro area were mostly steady, although Germany’s benchmark Bund was within sight of 2-1/2-year highs and set for its biggest weekly rise in eight weeks.

Equity investors have drawn a degree of reassurance from a fall in the VIX index — a measure of implied volatility on the S&P 500 index, also known as Wall Street’s “fear gauge”.

The index dropped below 20 for the first time since it spiked to a 2-1/2-year high of 50.3 last week, a jump that caused massive losses among investors who bet equity markets would stay stable on a combination of solid economic growth and moderate inflation.

“While the ‘Goldilocks’ risk environment from January appears to be fading, we do not believe we are on the cusp of a protracted risk sell-off, because the global growth cycle remains strong in our view,” Credit Agricole strategists said in a note to clients.

Extending the previous day’s losses, the dollar’s index against a group of six major currencies fell to 88.676, the lowest since December 2014. The index was on track to lose around 2 per cent on the week in its largest decline since February 2016. Against the yen, the greenback fell to its lowest in over a year.