July 5, 2014 12:48:05 am
World stocks were enjoying the view at an all-time high on Friday, lifted by a strong week of US economic data and promises from the European Central Bank that cheap money will be sloshing around for years.
European shares opened marginally in the red as the dust settled from Thursday’s forecast-busting US jobs data and ECB meeting, with investors taking the opportunity to lock in profits after the biggest week of gains since March. A new three-year peak for Asian stocks overnight meant MSCI’s All-World Share Index, which tracks 45 countries, set its fourth consecutive record high, while the dollar, US bond yields and growth-sensitive copper were also up on the week.
“You can’t fight the tape, it’s as simple as that,” said Justin Haque, a broker at Hobart Capital Markets, referring to the deluge of strong data this week, “It’s a very bullish scenario.”
With Wall Street closed later for Independence Day celebrations, markets were quieter than usual but there were still pockets of movement. Yields on lower-rated euro zone bonds continued to fall as analysts combed the details of new long-term loans the ECB has lined up for banks, and after it said on Thursday it stood ready to print money if needed.
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The ECB will give banks the opportunity to borrow up to 1 trillion euros for four years at a rate of only 0.25 per cent from September in the hope they will lend some of that money to businesses and consumers.
“More liquidity in the system is a boost for bonds,” said Peter Chatwell, fixed income strategist at Credit Agricole. Portuguese bonds though, which have underperformed this week due to concerns about an investigation into holding companies of the country’s largest bank, saw their yields edge up, with 10-year paper at 3.64 per cent.
Oil and safe-haven favourite gold were also under pressure as the unrest in Iraq and between Ukraine in Russia — supportive factors for both in recent weeks — remained in a lull.
Brent crude held steady above $111 a barrel but was set to post its biggest weekly loss since early January. US oil futures were down for a seventh straight day and heading for their longest such run since 2009. “Supply fears are easing somewhat, but Iraq is setting a high floor on prices,” said Victor Shum, vice-president of energy consultancy IHS Energy Insight.
MSCI’s broadest index of Asia-Pacific shares outside Japan ended up 0.2 per cent, touching its highest levels since May 2011 after a weekly gain of 1.7 per cent. Japan’s Nikkei stock average rose 0.6 per cent to hit a 5-1/2-month high, and gained 2.3 per cent for the week.
It came after US employment growth jumped in June and the unemployment rate declined to near a six-year low of 6.1 per cent, effectively dispelling fears about the economy’s health after a weather-hit start to the year. The headline gain of 288,000 jobs was well above forecasts of 212,000 and was the first time since the technology boom in the late 1990s that the gains topped 200,000 for five straight months.
The report helped the Dow Jones industrial average pass the 17,000 milestone and the benchmark S&P 500 rise to within 1 percent of the 2,000 level. Benchmark US Treasury yield hit a two-month high, which in turn burnished the dollar’s appeal. The benchmark 10-year yield last stood at 2.641 per cent, not far from its US close of 2.648 per cent. The dollar edged slightly down against the yen to 102.00 yen, but remained close to a two-week peak after a jump on Thursday.
The dollar index, which tracks the greenback against a basket of rivals, stood just below a one-week peak at 80.225 while the euro nudged lower to $1.3589.
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