LONDON / SYDNEY (Reuters) – Global stocks soared for the ninth consecutive day on Thursday, only record highs, as investors digested recent gains, while bulls were supported by the promise of more free money after a benign US inflation report. and a peaceful federal reserve outlook.
European stocks opened higher, with the STOXX 600 and the London FTSE 100 up 0.3%. This followed a moderate Asian session, with markets in China, Japan, South Korea and Taiwan closed due to the holiday.
MSCI’s broadest Asia-Pacific stock index outside Japan was 0.1%, having risen for four sessions to gain more than 10% so far this year.
Investors were also reflecting on the first call between US President Joe Biden and his Chinese counterpart, Xi Jinping, where Biden said that a free and open Indo-Pacific was a priority and Xi’s warning confrontation would be a “disaster” for both nations.
With Chinese markets closed, there was little reaction to news that the Biden government will consider adding “targeted new restrictions” to certain sensitive technology exports to China and will maintain tariffs for the time being.
S&P 500 futures were 0.2% higher, reaching historic highs on Wednesday.
The MSCI world equity index, which tracks stocks in 49 countries, was 0.1% higher. This was not far from the peaks reached the previous day and only supporting a sequence of nine days of gains, the first since October 2017.
“The story really is still US stocks in the first place,” said James Athey, chief investment officer at Aberdeen Standard Investments. “The earnings season has been especially strong in the USA, the fiscal stimulus coming from the Biden government is getting bigger in the market’s mind and most of the big winners of the pandemic are listed in the USA.
“Only the Fed can rock the boat and with yesterday’s disappointing impression of inflation, that outlook has dropped even further in the future.”
The prospect of further global stimulus had a major boost overnight, from a surprisingly smooth reading of US core inflation, which fell to 1.4% in January.
Federal Reserve Chairman Jerome Powell said he would like to see inflation reach 2% or more before even thinking about reducing the bank’s super easy policies.
Notably, Powell emphasized that, once the effects of the pandemic were eliminated, unemployment was closer to 10% than the reported 6.3% and therefore far from full employment.
As a result, Powell called for a “society-wide commitment” to reduce unemployment, which analysts saw as strong support for President Joe Biden’s $ 1.9 trillion stimulus package.
Westpac economist Elliot Clarke estimated that more than $ 5 trillion in cumulative stimuli, worth 23% of GDP, would be needed to repair the damage caused by the pandemic.
“Financial conditions are expected to remain highly favorable to the US economy and global financial markets in 2021 and probably until 2022,” he said.
The mix of bottomless Fed funds and a moderate inflation report encouraged bond markets, leaving 10-year yields at 1.14%, up from a 1.20% rise earlier in the week.
Italian bond yields remained close to recent lows before a long-term bond auction and how Mario Draghi is expected to present his new government coalition in the coming days. The yield on Italy’s 10-year BTP, or government bond, dropped a base point to 0.490%, close to its lowest level since the beginning of January.
After the US inflation report and the Fed’s Powell reiterated that rates could stay lower for longer, the US dollar fell before stabilizing during European negotiations. The dollar index was stable at 90.438, far from a 10-week top of 91,600 touched at the end of last week.
Gold rose 0.1% to $ 1,845.26 an ounce, with investors taking platinum to a six-year peak with more demand bets from automakers. [GOL/]
Oil prices fell, having enjoyed the longest winning streak in two years amid supply cuts from producers and hopes that the launch of vaccines will lead to a recovery in demand. [O/R]
Brent crude futures dropped 39 cents to $ 61.07. US crude oil fell 36 cents to $ 58.31 a barrel.
Additional reporting by David Henry in New York; edition by Lincoln Feast, Sam Holmes, Larry King