Market bulls resumed their charge yesterday, as strong data from the world’s biggest economies sent stock index records tumbling and oil prices to their highest since mid-2015.
In an apparent acceleration of last year’s global equity boom, MSCI’s world index and London’s FTSE both set records in Europe, and the Dow Jones was expected to break the 25,000-barrier.
Tokyo’s Nikkei – Asia’s biggest market – had earlier shot to its highest since 1991 with a 3.3 per cent surge. Asia-Pacific excluding Japan scaled a decade-high peak as a fifth day of gains in China helped emerging market stocks to a six-and-a-half-year high as well.
The data published yesterday reinforced expectations that solid world growth will boost demand for goods, including oil, and lift corporate earnings.
China’s services sector activity hit its highest level in more than three years, manufacturing data from Japan came in strong and euro zone surveys showed the bloc enjoying its strongest run in nearly seven years.
Another factor behind the upbeat mood was that minutes of the Federal Reserve’s mid-December meeting released on Wednesday did little to change that view that it will stick to measured increases in US interest rates.
They showed policymakers expect US President Donald Trump’s tax overhaul will to boost consumer spending but are still uncertain about the wider impact the stimulus would have on things like inflation.
Analysts are now wondering whether the strength of the euro zone economy could encourage the European Central Bank to start raising its still-negative interest rates.
“We see some very positive euro sentiment in the market right now,” said Commerzbank currency strategist Esther Reichelt in Frankfurt.
Yields on French bonds held at 0.80 per cent as neighbouring Germany’s 10-year rates inched up to 0.45 per cent. But Spain’s yields saw their biggest drop in almost two months as it easily sold 4.6 billion euros of bonds.
The bigger focus, though, was on commodity prices, which often have a big influence on global inflation.
Oil prices were touching levels not seen since before commodity markets slumped in 2014 and 2015, boosted by tensions in key producer Iran and ongoing Opec-led output cuts.
US West Texas Intermediate (WTI) crude futures rose as high as $62.17 per barrel, their highest level since mid-2015 before easing back. International benchmark Brent rose to a two-and-a-half-year high of $68.19 a barrel.
At the same time, inflation expectations indicated by the gap between 10-year United States inflation-linked bonds and conventional bonds was above two per cent, at the highest level since March.