Investors rediscovered a taste for the dollar and commodities yesterday, as upbeat Chinese and US economic news whetted appetite for riskier assets globally, while tensions over North Korea simmered in the background.
One big gainer was US gasoline which surged six per cent to two-year peaks as flooding and damage from Tropical Storm Harvey shut nearly a quarter of US refinery capacity. Prices are up more than 20 per cent in the past week.
Adding to the bullish mood, a survey showed Chinese factory growth unexpectedly accelerated in August, confounding forecasts for a slight slowdown. The official PMI firmed to 51.7, from 51.4 in July.
That gave a boost to industrial metals, with copper nearing its highest since late 2014 andon track for gains of 7 per cent for August.
European shares firmed too, with London’s FTSE, Germany’s DAX and France’s CAC40 ahead by 0.6 – 0.8 per cent. Euro zone inflation marginally beat forecasts, which should give the European Central Bank heart when it meets next week.
Wall Street futures pointed to 0.3 per cent gains for the main S&P 500, Dow and Nasdaq markets. Traders there will also be digesting inflation data as a debate continues about whether the Federal Reserve will raise US interest rates again this year.
In Asia, Japan’s Nikkei had closed up 0.7 per cent, its best level in two weeks, helped by a pullback in the yen.
MSCI’s broadest index of Asia-Pacific shares outside Japan edged down on the day as emerging market stocks more broadly took a breather too.
But August has been their eighth straight month of gains – their best run since 2003 and driving an almost 30 per cent surge in EM equities this year.
Meanwhile, against a basket of major currencies, the dollar crept ahead to 93.196, up from a 2-1/2-year low of 91.621 touched on Tuesday and on course for its first monthly rise since February.
The dollar also bounced to 110.50 yen, off a 4-1/2-month low of 108.25.
The euro retreated to $1.1845 from its top of $1.2069, weighed in part by speculation the European Central Bank might start to protest at the currency’s strength.
The euro has risen over 13 per cent against the dollar this year as pessimism over the euro bloc has dissipated and its economy has started to gain some traction.
The bounce in the dollar shaved 0.5 per cent off the price of gold to $1,302.50 an ounce, short of Tuesday’s 9-1/2-month high of $1,325.94.
With so much US refinery capacity shut in the wake of Tropical Storm Harvey, oil prices were hit by demand concerns.
Brent eased nine cents to $50.77 a barrel, while US crude hovered at $46.05.