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GLOBAL MARKETS-World shares scale new peak on stimulus hopes; oil gains

Published 06/02/2021, 08:29 am
Updated 06/02/2021, 08:30 am
© Reuters.
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(Adds close of U.S. markets)

* MSCI ACWI ends at record high, spurred by Wall Street

* Earnings, U.S. stimulus hopes offset weak U.S. jobs report

* Bond yields rise on increased inflation expectations

* Global currencies vs U.S. dollar https://tmsnrt.rs/2PmYOcE

By Herbert Lash

NEW YORK, Feb 5 (Reuters) - A gauge of global equity markets scaled a new record on Friday on investor expectations of further stimulus from Washington and economic revival hopes that also lifted crude oil prices to nearly $60 a barrel.

MSCI's all-country world index .MIWD00000PUS , which captures equity performance in 50 countries but is heavily weighed to U.S. stocks, especially big tech, rose 0.62% to cap its best week in three months, a gain of 4.35%.

Longer-term Treasury yields rose after a Labor Department report showed U.S. jobs rebounded less than forecast in January, which underscored the need to pass a $1.9 trillion COVID-19 relief package, President Joe Biden said. Democrat lawmakers approved a budget outline that will allow them to muscle Biden's plan through in the coming weeks without Republican support. losses in December and November were revised higher than previously reported. rose as the dollar retreated slightly, as investors will continue to bank on the greenback with Treasury yields rising.

The market was looking through the short-term disappointment in the employment report, said Tom Hayes, chairman and managing member at hedge fund Great Hill Capital LLC in New York.

"It's very hard to get too pessimistic about downward revisions when you have three tailwinds at your back, namely the stimulus, the vaccinations and (declining coronavirus) cases, and earnings," Hayes said.

Job losses are still concentrated in retail, leisure and hospitality, and healthcare, particularly in healthcare and nursing homes, "so this is all COVID-related issues," he said.

As more people get vaccinated, jobs will come back, which is driving investor sentiment, Hayes said.

The Nasdaq and S&P 500 also hit new highs as stronger-than-expected corporate results in the fourth quarter and companies on track to post earnings growth for the first quarter instead of a decline also have boosted sentiment. Dow Jones Industrial Average .DJI rose 0.3%, the Nasdaq Composite .IXIC added 0.57% and the S&P 500 .SPX gained 0.39%, led by Amazon.com Inc AMZN.O and Google-parent Alphabet Inc GOOGL.O .

Those two companies, along with Apple Inc AAPL.O , Microsoft Corp MSFT.O , Tesla TSLA.O and Facebook Inc FB.O , are the top six components of MSCI's all-country world index.

In Europe, stocks closed little changed at the end of an upbeat week where sentiment cooled on the disappointing U.S. jobs data and declining German industrial orders. Germany's export-oriented DAX index .GDAXI slipped 0.03%, but France's CAC 40 .FCHI rose 0.9% to close at a two-week high.

German Economy Ministry data showed domestic orders fell by 0.9% in December, while orders from abroad decreased by 2.6%. Contracts from the euro zone tumbled by 7.5%. broad STOXX 600 .STOXX posted its best weekly performance since November, rising 3.5%, despite a lackluster session on Friday.

Despite trending lower against the euro and Japanese yen, the dollar headed for its best weekly gain in three months. The U.S. dollar index =USD traded near a two-month high, up 0.57% for the week, but down nearly as much on the day.

The euro EUR= was up 0.73% to $1.2049, while the yen JPY= strengthened 0.18% versus the greenback at 105.36 per dollar.

Oil hit its highest level in a year, above $59 a barrel, supported by hopes of a quicker economic revival and supply curbs by the Organization of the Petroleum Exporting Countries and its producer allies.

Brent crude futures LCOc1 rose 50 cents to settle at $59.34 a barrel. U.S. crude futures CLc1 settled up 62 cents at $56.85 a barrel.

U.S. gold futures GCv1 settled up 1.2% at $1,813 an ounce.

Government bond investors see an uptick in inflation after the unemployment report. Breakeven rates on 10-year Treasury Inflation-Protected Securities (TIPS) US10YTIP=RR , which measure average annual inflation expectations for the coming decade, jumped to 2.197%, the highest level since May 2018.

The 10-year U.S. Treasury US10YT=RR note rose 3.5 basis point to 1.1704%, ending the session at its highest market yield since March.

The net read from the unemployment report is that it supports a steeper yield curve, said Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC in New York.

"The big thing is the curve," he said.

Bond yields rose in Europe as well, with Germany's 30-year government bond yield DE30YT=RR climbing back into positive territory for the first time since September.

MSCI's gauge of Asian shares outside Japan .MIAPJ0000PUS rose 0.66%, while Japan's Nikkei .N225 rallied 1.5%.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Global assets

http://tmsnrt.rs/2jvdmXl Global currencies vs. dollar

http://tmsnrt.rs/2egbfVh Emerging markets

http://tmsnrt.rs/2ihRugV MSCI All Country World Index Market Cap

http://tmsnrt.rs/2EmTD6j Recovery in earnings

https://tmsnrt.rs/3oLYFfL

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