LONDEN / SYDNEY (Reuters) – Global equities rose for a ninth day on Thursday, just below record highs, while investors devoured recent gains, while bulls are sustained by the promise of more free money after a benign US inflation report and a dove Federal Reserve Prospects.
European equities opened higher, with the STOXX 600 and the London FTSE 100 up 0.3%. This follows a subdued Asian session as markets in China, Japan, South Korea and Taiwan closed for holidays.
MSCI’s broadest index of Asia-Pacific stocks outside Japan added 0.1%, after climbing all four sessions to gain more than 10% so far this year.
Investors also reflected on the first telephone conversation between US President Joe Biden and his Chinese counterpart, Xi Jinping, where Biden said a free and open Indo-Pacific was a priority and Xi warning confrontation a “disaster” for both countries would be.
With the closure of Chinese markets, there was little response to news that the Biden government would look at adding ‘new restricted restrictions’ on certain exports of sensitive technology to China and that it would currently maintain tariffs.
The future for the S&P 500 was 0.2% higher after reaching historic highs on Wednesday.
The MSCI World Equities Index, which tracks equities in 49 countries, was 0.1% higher. It was not far from highs reached the previous day and made just a nine-day profit, a first since October 2017.
“The story in the first place is still US equities,” said James Athey, investment director at Aberdeen Standard Investments. ‘The earnings season was particularly strong in the US. The fiscal stimulus of the Biden government is growing in the market and most of the big winners from the pandemic are listed in the US.
“Only the Fed can shake the boat and with yesterday’s disappointing inflationary pressures, the outlook has slipped even further into the future.”
The outlook for more global stimulus received a major boost overnight due to a surprisingly soft reading on US core inflation, which fell to 1.4% in January.
Federal Reserve Chairman Jerome Powell has said he wants to see inflation reach 2% or more before he even thinks about lowering the bank’s easy policy.
Powell particularly emphasized that once the pandemic effects were eliminated, the unemployment rate was closer to 10% than the reported 6.3% and thus a long way from full service.
As a result, Powell called for a “societal commitment” to reduce unemployment, which analysts saw as strong support for President Joe Biden’s $ 1.9 billion stimulus package.
Westpac economist Elliot Clarke will need more than $ 5 billion in cumulative stimulus, worth 23% of GDP, to repair the damage caused by the pandemic.
“Financial conditions are expected to be very supportive in 2021, and probably until 2022, the US economy and global financial markets,” he said.
The mix of bottomless Fed funds and a tame inflation report encouraged bond markets, leaving ten-year returns at 1.14%, below a high of 1.20% earlier in the week.
Yields on Italian bonds remained near recent lows ahead of the long-term bond auction, and as Mario Draghi is expected to present his new governing coalition in the next few days. Italy’s yield for ten-year BTP, or government bonds, fell by one basis point to 0.490%, near the lowest since early January.
After the US Inflation Report and the Fed’s Powell reiterated that rates could remain lower for longer, the US dollar slipped before rising during European trading. The dollar index was low at 90,438, away from a peak week of 91,600 that hit late last week.
Gold rose 0.1% at $ 1,845.26 per ounce as investors pushed platinum to a six-year high on greater demand from automakers. [GOL/]
The oil price has fallen, after enjoying the longest winning streak in two years amid declining supply from producers, hoping that the roll-out of vaccines will cause a recovery in demand. [O/R]
Brent crude futures fell 39 cents to $ 61.07. U.S. crude fell 36 cents to $ 58.31 a barrel.
Additional reporting by David Henry in New York; Edited by Lincoln Feast, Sam Holmes, Larry King