World shares hit highs as markets focus on earnings

LONDON: World shares hit record highs in the European session on Monday, as markets were generally upbeat about the prospects for a global economic recovery from COVID-19, ahead of a busy week for earnings.

Europe’s STOXX 600 rose to a record high before easing some gains, up 0.1% at 1105 GMT. Asian shares hit one-month highs overnight.

MSCI world equity index, which tracks shares in 49 countries, also climbed to a new peak, up 0.2%.

But U.S. stock futures pointed to a lower open for Wall Street, ater the S&P 500 and the Dow closed at record highs in the previous session.

Mathias Scheiber, global head of porfolio management at Wells Fargo Asset Management cited low interest rates, the rollout of COVID-19 vaccines and the fiscal stimulus package in the United States as reasons for his bullish stance on equities.

“Risk is coming down, volatility is coming down … we see the slow reopening of global economies, the rollout of the vaccine and the huge catch-up in demand so from that perspective it should be positive for economic growth.”

“We had a strong rally in cyclical and value stocks since the start of this year - we would like to see confirmation in the earnings.”

Earnings from IBM and Coca-cola are due later in the session. Neflix reports on Tuesday. Later in the week, American Airlines and Southwest will be the first major POST-COVID cyclicals to post results.

The European Central Bank meeting on Thursday will also be in focus this week. ECB President Christine Lagarde said last week that the euro zone economy is still standing on the “two crutches” of monetary and fiscal stimulus and these cannot be taken away until it makes a full recovery.

The benchmark U.S. Treasury yield, which dropped as low as 1.528% last Thursday, was at 1.5764%.

In currency markets, the dollar index was down 0.6% at its lowest levels in more than a month, at 91.052, having weakened since its recent peak of 93.439 at the end of March.

Dollar-yen was also down 0.6%, changing hands at 108.145 . The euro was up 0.5% versus the dollar at $1.20435 .

“We have been highlighting over the past two months that USD could botom out, in contrast to consensus, and believed that this would be a tactical problem for EM and for certain commodity trades,” wrote JP Morgan’s head of global and European equity strategy, Mislav Matejka, in a note to clients. “We think the risk of a firmer USD, through rising Us-europe interest rate differential, is not finished.”

Matejka also said that, although there is the technical potential for a correction in equities, he would not cut stocks exposure on the six- to nine-month horizon.

“We think that it is more likely that we will be raising our year-end targets, rather than reducing them, as we move through the summer,” he said.

Likewise, Wells Fargo Asset Management’s Mathias Scheiber said “We believe we are in the ‘buy the dip’ environment at this moment given that both fiscal and monetary policy are very supportive, so if we would see a correction … we would probably increase the equity position.”

Bitcoin was up 1% at around $56,850, nursing losses from Sunday, when it plunged as much as 14% to $51,541.

Oil prices fell as rising COVID-19 infections in India prompted concern than stronger measures to contain the pandemic would hurt economic activity.

A recent surge in COVID-19 cases could see major parts of Japan slide back into states of emergency, with authorities in Tokyo and Osaka looking at renewed curbs.

Asian markets rose on Monday ater recovery hopes for the coronavirus-batered US economy fuelled another round of record highs on Wall Street to close last week’s trade.

Both the Dow and S&P finished at new peaks on Friday and also posted their fourth consecutive weekly gains, following on the heels of strong data for American housing starts, employment and retail sales.

Investors are banking on accelerated US pandemic containment efforts marking a step toward economic normalcy, with half of all adults in the country now having had at least one vaccine dose.

The easing of restrictions in Europe has also boosted optimism even as analysts keep a wary eye on alarming outbreaks prompted by new strains of the virus elsewhere in the world.

“Stocks will kick off the week at record highs, with investors digesting what appears to be an optimisticrecoverydespitemountingconcernsabout new Covid-19 variants,” said Stephen Innes of Axi.

With less economic data on the calendar in the days ahead and the Fed in a communications blackout ahead of its April 28 rates meeting, “it might be a week for spring housekeeping in the markets”, he added.