LONDON: World stocks hovered below record highs on Friday, set to reverse two straight weeks of losses while the euro hit its highest levels in six weeks following stronger than expected economic data this week.
The MSCI World Index, which tracks shares in 47 countries, rose 0.1 per cent and is set for gains of more than 1 per cent this week. Its climb was underpinned by gains in Europe and Asia. The pan-European STOXX 600 index was up almost half a per cent by midday in London. Wall Street futures indicated a positive open.
Along with surveys this week that showed Europe’s services and manufacturing industries outshining the most optimistic forecasts in Reuters polls, the growing prospect of a grand coalition in Germany boosted sentiment around European equities.
Germany’s Social Democrats are ready to hold talks with other parties on breaking a political deadlock created by Chancellor Angela Merkel’s failure to form a three-way coalition government, a senior member of the centre-left party said.
“There’s a lot of impetus there to resolve the situation without recourse to another election,” Ken Odeluga, market analyst at City Index, said, adding that an easing in the euro’s ascent was also supportive of German equities.
The euro touched its highest point in six weeks at $1.1875, up 0.1 per cent on the day and on track to mark its third consecutive week of gains.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.2 per cent, as Hong Kong shares bucked the softness in mainland Chinese shares to gain 0.6 per cent.
Stocks in mainland China dropped to three-month lows after big falls the previous day on concerns about fresh government steps to curb financial risks and rise in Chinese bond yields.
Japan’s Nikkei ended up 0.1 per cent after a market holiday on Thursday, while US stock futures were little changed after shortened trading on Thursday.
In the currency market, the US dollar remained under pressure after minutes from the US Federal Reserve’s latest policy meeting highlighted concern among some of the board members over persistently low inflation.
The index that measures the greenback against a basket of peers was 0.2 per cent lower.
A weaker dollar saw the British pound staying near a six-week high, poised to post gains for a third consecutive week as markets interpreted the latest comments from top EU policymakers as mildly positive for Brexit negotiations, though gains were capped.
Although solid global economic growth and strong corporate earnings have underpinned shares in Asia and many other parts of the world, a tumble in mainland Chinese shares caught some investors’ attention.
The CSI300 index fell as much as 0.9 per cent to a three-month low in choppy trade after a 3.0 per cent fall - its biggest in almost a year-and-a-half - on Thursday, as a sell-off in domestic bonds that has been under way since last month gnawed away at investor sentiment. In late trade, the index was almost flat.
Investors were also reacting to new policies aimed at curbing micro-lending and tightening regulation of asset management businesses.
The start-up board Chinext Index hit its lowest level since mid-August and last stood down 0.3 per cent, ahead of a potential swell in sales of small shares in the next couple of months from institutional investors after their IPO (Initial Public Offering) lock-up period ends.
Earlier this month Chinese stocks had risen almost 15 per cent from their lows hit in May, and analysts said some investors were selling to lock in profits.
US crude futures hit a two-year high on the shutdown of Keystone pipeline, a major crude pipeline from Canada to the United States.
US West Texas Intermediate (WTI) crude futures were up over 1 per cent at $58.71 a barrel from their last settlement.
International benchmark Brent futures held firm at $63.67, up 0.2 per cent on the day.
In a sign of a tightening market, both crude benchmarks are in backwardation, where spot prices are higher than those for future delivery, which makes it unattractive for traders to store oil for later sale.