World stocks near record highs as China, U.S. data back global recovery hopes
A batch of Chinese and U.S. economic data helped underpin global stocks near record highs on Friday, as investors priced in a solid global recovery from the coronavirus-induced slump.
In Asia, markets were largely steady after China reported a sharp acceleration in first quarter growth, though the reading slightly undershot expectations while retail sales bounced strongly last month. read more
Shanghai shares (.SSEC) dipped 0.2% while the Chinese yuan eased.
Analysts said the China data did little to change expectations of a strong recovery and further policy tightening to curb any excesses in property investments.
“Property investments were weaker but that’s no surprise given policy makers have been tightening loans to the sector while consumption is continuing a normalisation,” said Ei Kaku, senior strategist at Nomura.
“On the whole the data is unlikely to have a big impact.”
MSCI’s broadest gauge of world stocks (.MIWD00000PUS) ticked down 0.05% by mid-Asian trade following 0.89 percent gains the previous day to a record high
“U.S. economic data released yesterday was all strong, confirming the U.S. economy is firmly on a recovery track,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
U.S. retail sales rebounded 9.8% in March, the largest increase since May 2020, in a gain that pushed the level of sales 17.1% above its pre-pandemic level to a record high. read more
The brightening economic prospects were underscored by other data, including first-time claims for unemployment benefits tumbling last week to the lowest level since March 2020.
Despite strong data, U.S. bond yields dropped, in part driven by Japanese buying, as they have began a new financial year this month.
The 10-year U.S. Treasuries yield dropped to 1.529%, a five-week low, on Thursday and last stood at 1.578% , off its 14-month high of 1.776% set at the end of March.
“The market has already fully priced in an U.S. economic recovery in the near term. And if the Federal Reserve will keep interest rates on hold for the next two to three years, no doubt the carry of U.S. bonds would be very attractive compared with Japanese or euro zone bonds,” said Chotaro Morita, chief fixed income strategist at SMBC Nikko Securities.
The fall in long-term bond yields benefited stocks, and particularly tech shares, given the idea that their historically expensive valuations can be justified because investors would have no choice but to buy shares to make up for low returns from bonds.
In the currency market, lower U.S. yields were a drag on the U.S. dollar.
The euro stood at $1.1951 , having hit a six-week high of $1.19935 overnight while the U.S. currency slipped to a three-week low of 108.61 yen and last traded at 108.89.
Oil prices held firm after hitting a four-week highs on Thursday following positive U.S. economic data and higher demand forecasts from the International Energy Agency (IEA) and OPEC.
Brent futures stood flat at $66.89 per barrel, while U.S. crude was also little changed at $63.36 per barrel, both on course for their first substantial weekly gains in six.