Markets’ optimism up on trade and stimulus
BONDS FALL, EQUITIES RISE AS BEARISH BETS UNWIND
World stocks rose for the sixth straight day on Wednesday and bond prices fell as investors unwound safety bets, encouraged by hopes of a resolution to the Sino-US trade standoff and signs Europe may be preparing to ease budget spending rules.
Higher-risk assets such as equities and emerging markets rose almost across the board at the expense of safe-haven plays such as gold and bonds, as political risk appeared to ease in Britain, Italy and Hong Kong.
US President Donald Trump’s firing of hawkish national security adviser John Bolton was also seen as a positive, as it could potentially lead to an easing of tensions with Iran.
There are hints China will go full-throttle with growth stimulating measures following a raft of dismal data: having already eased banks’ cash curbs, it has now scrapped quota restrictions on two inbound investment schemes in order to lure more foreign capital.
Investors are also awaiting the European Central Bank’s meeting today at which it is
expected to cut interest rates and unveil more bond buying, though policymakers’ comments have recently raised doubts about the extent of stimulus that could be delivered. “We’re seeing yields backing up and safe havens and defensive equities underperform so we are seeing a bit of rotation. I don’t think it’s a structural shift, it’s just that markets went too far and too soon, and we are seeing alleviation of that move,” said Justin Onuekwusi, a fund manager at Legal & General Investment Management.
Main indices
By 0830 GMT, MSCI’s world equity index was up 0.3 per cent following 0.5-1.5 per cent gains across Asian bourses, including Tokyo Seoul and Hong Kong while a pan-European equity index rose 0.7 per cent to five-week highs.
Wall Street stocks inched higher early yesterday after China said it would pull some US products from its tariff list. Investors also have taken heart from a shift in the bond market led to higher returns after slumping Treasury yields in August raised recession worries.
Around 15 minutes into trading, the Dow Jones Industrial Average was up 0.2 per cent at 26,964.16. The broad-based S&P 500 edged up 0.1 per cent at 2,983.22, while the techrich Nasdaq Composite Index gained 0.2 per cent to 8,103.03.