LONDON / SYDNEY (Reuters) – Global stocks rallied for the ninth straight day on Thursday, just off record highs, as investors digested recent gains, while bulls were bolstered by the promise of more free money following a benign US inflation report and Outlook Reserve.
European equities opened higher, with the STOXX 600 and London’s FTSE 100 opening 0.3%. That followed a moderate Asian session when markets in China, Japan, South Korea and Taiwan were closed for holidays.
MSCI’s widest index of Asia-Pacific stocks outside Japan added 0.1% after climbing four sessions to gain more than 10% so far this year.
Investors also reflected on the first phone call between US President Joe Biden and his Chinese counterpart, Xi Jinping, in which Biden said a free and open Indo-Pacific was a priority and Xi warning confrontation would be a “disaster” for both countries. .
With Chinese markets closed, there was little reaction to news that the Biden administration will look into adding “new targeted restrictions” on certain sensitive technology exports to China and will maintain tariffs for the time being.
Futures for the S&P 500 were up 0.2% after hitting historic highs on Wednesday.
The MSCI world stock index, which tracks stocks in 49 countries, was 0.1% higher. That was not far from the peaks reached the day before and only a nine-day streak of gains, a first since October 2017.
“The story is actually still primarily US equities,” said James Athey, investment director at Aberdeen Standard Investments. “The earnings season has been especially strong in the US, fiscal stimulus from the Biden administration is growing in the eyes of the market, and most of the big winners from the pandemic have been recorded in the US.
“Only the Fed can turn the boat upside down and with yesterday’s disappointing inflation print, that outlook has just shifted even further into the future.”
The outlook for more global stimulus was boosted overnight by a surprisingly soft reading of US core inflation, which declined to 1.4% in January.
Jerome Powell, chairman of the Federal Reserve, said he wanted to see inflation rise to 2% or more before even thinking about phasing out the bank’s super simple policies.
In particular, Powell stressed that once the pandemic effects had subsided, the unemployment rate was closer to 10% than the reported 6.3% and thus far from full employment.
As a result, Powell called for a “social commitment” to reduce unemployment, which analysts say was strong support for President Joe Biden’s $ 1.9 trillion stimulus package.
Westpac economist Elliot Clarke estimated that more than $ 5 trillion in cumulative stimulus packages, worth 23% of GDP, would be needed to repair the damage caused by the pandemic.
“Financial conditions are expected to continue to provide strong support to the US economy and global financial markets in 2021 and likely through 2022,” he said.
The mix of bottomless Fed funds and a tame inflation report spurred bond markets, pushing the 10-year yield to 1.14%, down from a high of 1.20% at the start of the week.
Italian bond yields have stayed near recent lows for a long-term bond auction and as Mario Draghi is expected to present his new government coalition in the coming days. The yield of Italy’s 10-year BTP, or government bond, fell one basis point to 0.490%, almost the lowest level since early January.
After the US inflation report and the Fed’s Powell reiterated that interest rates could stay lower for longer, the US dollar fell before remaining stable during European trading. The dollar index was flat at 90,438, away from a 10-week high of 91,600 reached late last week.
Gold rose 0.1% to $ 1,845.26 an ounce as investors pushed platinum to a six-year peak on bets on more demand from automakers. [GOL/]
Oil prices fell after the longest extraction streak in two years amid producer supply, and it hopes that vaccine rollouts will spur a recovery in demand. [O/R]
Brent futures were down 39 cents to $ 61.07. US crude oil fell 36 cents to $ 58.31 a barrel.
Additional reporting by David Henry in New York; edited by Lincoln Feast, Sam Holmes, Larry King