LONDON (Reuters) – World stocks hit record highs on Tuesday, bolstered by strong economic data from China and the United States, as currency and bond markets paused after a month of rapid gains in the dollar and government bond yields.
Stocks as measured by the MSCI All Country World Index in 49 countries hit an all-time high as European stocks overtook gains in Asia and Wall Street overnight in their first trading session since the Easter holidays.
The pan-European STOXX 600 index hit a record high after opening in Europe.[.EU]
Profit-taking pushed the Japanese Nikkei down 1% and dragged the Shanghai Composite.
The S&P 500 closed at a record high on Monday and futures fell 0.2% on Tuesday. [.N]
Following a massive US job report on Friday, March data showed that services activity hit an all-time high. The Chinese services sector has also been gaining steam with the strongest sales increase in three months.
“We believe investors should not fear entering the market at a record high,” said Mark Haefele, Chief Investment Officer, UBS Global Wealth Management.
“We recommend continuing to position for the reflation trade as the economic recovery accelerates. Data released Friday showed that nonfarm payrolls in the US rose 916,000 in March, the biggest gain since August.
The yield on US 10-year Treasuries fell to 1.7093%, while the US dollar largely missed a major rebound in strong data, remaining at $ 1.1819 per euro per day after its strongest drop since mid-March.
Elsewhere, Swiss lender Credit Suisse tried to draw a line under its exposure to the implosion of hedge fund Archegos Capital, announcing that the debacle would cost it about $ 4.7 billion and two senior executives their jobs.
STABLE CONDITION
Stable government bond yields and the dollar follow a rise in the first quarter, with 10-year yields up 83 basis points, the largest quarterly gain in a decade and the dollar index up 3.6% – the strongest since 2018.
“Bonds have now settled down,” said Omkar Joshi, portfolio manager at Opal Capital Management in Sydney, after a hard and fast sell-off. “I think markets can keep running from here.”
Minutes from the U.S. Federal Reserve’s March meeting, scheduled for Wednesday, are the next focus for bond markets, although they don’t address the latest data surprises and markets are way ahead of Fed projections for years of low interest rates .
Fed Fund futures have priced gains next year, while euro dollar markets priced them by December.
“What needs to be tested is how the Fed is strengthening and reassuring its flexible policy target for average inflation,” said Vishnu Varathan, chief economist at Mizuho Bank in Singapore.
“The dollar’s movement in recent weeks reflects the progress of the markets, despite what the Fed has said.”
Currencies were fairly calm during the Asia session, holding on to small gains on the dollar. The Australian dollar traded at $ 0.7647 after the central bank held policy steady as expected.
The yen was slightly softer at 110.21 per dollar, while the pound reached its two and a half week high at $ 1.3919. [FRX/]
The dollar’s surge helped oil prices make up for Monday’s losses on concerns that a new wave of COVID-19 infections in Europe and India could limit energy demand. [O/R]
Brent crude futures rose 1.4% to $ 62.98 a barrel, while US crude oil rose 1.5% to $ 59.56 a barrel. Gold rose 0.2% to $ 1,732 an ounce. [GOL/]
Reporting by Ritvik Carvalho; additional reporting by Thyagaraju Adinarayan in London; and Tom Westbrook in Singapore; Editing by Nick Macfie