European stocks climbed on Friday as renewed appetite for risk fuelled a year-end equity rally and pushed US benchmark Treasuries yields above three per cent for the first time since September.
Japan’s low-yielding yen extended losses, hitting 105 yen to the dollar for the first time in five years as well as a five-year low against the euro.
Turkey was again in the emerging market spotlight, with the lira hitting a record low and stocks falling to their weakest level in 17 months as a corruption scandal pitting the government against the judiciary took its toll on markets.
US 10-year T-note yields rose to 3.002 per cent, reflecting signs of improvement in the US economy, which fuelled expectations of a steady withdrawal of stimulus by the Federal Reserve next year.
Meanwhile in Europe, Bund futures fell by around half a point. Most equity markets gained ground on Friday, with both the pan-European FTSEurofirst 300 index and Germany’s Dax rising 0.8 per cent.
Frankfurt’s blue-chip index hit a record high and was on track to post an annual gain of around 25 per cent, outpacing an expected rise of around 15 per cent for the FTSEurofirst 300.
Japan’s Nikkei stock average ended at its highest close in six years, up 55.6 per cent so far in 2013, its best annual performance since 1972, driven by the country’s aggressive fiscal and monetary stimulus.
The effort seems to be working, with figures out on Friday showing Japanese manufacturing activity expanding at the fastest rate in over seven years while firms added workers at the quickest pace in over six years.
The euro also climbed against the dollar, hitting a peak of $1.3894, its highest since October 2011 according to EBS data.
Though the eurozone’s economic recovery is seen as sluggish, the currency has been underpinned by European banks’ repatriation of assets as well as buying by the region’s exporters as its current account surplus has increased sharply.
The European Central Bank will take a snapshot of the capital positions of the region’s banks at the end of 2013, which it will use in conducting an asset-quality review next year to work out which of them will need fresh funds. This has led to some demand for euros from banks to help shore up their balance sheets, traders said.