Upbeat data from China helped lift global markets as 2017 trading started in earnest yesterday, with the dollar notching its biggest gain in three weeks, oil on a tear and European stocks setting a one-year high.
Much of Europe had been open on Monday but it was the first day back for its biggest stock market, Britain’s FTSE 100 , and it wasted no time in hitting a new record high of 7,196 points with a 0.7 gain.
Germany’s DAX and France’s CAC 40 climbed too and among individual stock movers, Italian banks were back among the top risers, with newly-merged Banco BPM up 4.6 per cent on its second day of trading.
Commodity-linked stocks jumped 1.3 per cent as oil and metals prices cheered the China data that had showed output from the country’s giant manufacturing sector reaching a near six-year high.
It bolstered the ‘reflation’ theme that dominated the latter stages of 2016 and helped get currency and bond markets back in their pre-break rhythm after a mixed recent run.
The US dollar racked up its biggest rise in almost three weeks against a basket of the world’s other major currencies to leave it just one per cent off December’s 14-year high.
Benchmark European government bond yields also tacked 5-8 basis points higher as the first inflation readings out Germany and in France pointed to a higher eurozone figure which is due today.
Long-term inflation expectations in the eurozone, measured by the five-year, five-year forward rate, are near their highest levels in more than a year and close to the ECB’s near two per cent target, as the central bank prepares to pare back the pace of its money-
In commodities, oil prices jumped over two per cent in Europe as the China data fed into a market that is being buoyed by hopes a deal including Opec and non-Opec producer countries will drain the recent global supply glut.
Oil was the world’s best-performing major asset class in 2016, with a gain of around 50 per cent and global benchmark Brent was up 2.7 per cent at $58.31 by 0945 GMT as US crude topped $55 a barrel.
Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares rose 0.6 per cent as most regional markets reopened after the New Year holiday although Japan’s Nikkei was still closed.
Australian shares were the best performers in the region, closing up 1.2 per cent.
China was Asia’s worst performing major stock market in 2016 with a 11.3 per cent loss in its worst year in five. The positive Chinese news also lifted the Australian dollar, which added 0.6 per cent to $0.7230, while gold sagged, with the precious metal dropping 0.3 per cent to $1,148 an ounce.
Back in Europe, the pick ups in Germany and French inflation came on the heels of data on Monday showing manufacturers ramped up activity at the fastest pace in more than five years in December.