World stocks clawed back more losses yesterday after spending much of the week in the red, helped by signs of progress in US tax reform and strong corporate results, though many hurdles remain to secure passage of a tax cut deal.
The US House of Representatives passed a tax overhaul expected to boost share prices if it becomes law. The legislative battle now shifts to the Senate.
Despite their bounceback, however, global stocks were still on track for a second straight week of losses, their longest losing streak since August.
The MSCI world equity index, which tracks shares in 47 countries was up 0.1 per cent on the day, but was heading for a 0.1 per cent fall on the week.
European shares were sluggish in early deals after the previous session’s strong recovery, with the STOXX 600 index falling back 0.1 per cent as disappointing company results and downgrades weighed.
As earnings season drew to a close with 90 per cent of US and European companies having reported, analysts said results were supportive but weaker than in the previous quarters.
But it has been a bruising week, with global high yield bond markets also on course for a second straight week of losses – for the first time in a year – and Wall Street volatility at its highest in three months. Yesterday, however, high yield “junk” bond prices recovered and market volatility also eased.
The US Treasury yield curve remained on investors’ radar, reaching its flattest level in a decade, reflecting a belief that the Federal Reserve will continue to raise interest rates, pushing yields on the short end higher. At the same time, US inflation, although trending higher, will likely remain subdued, limiting yields on longer-dated bonds.
The spread between US two-year and 10-year yields narrowed 1.6 basis points. It was last at 64.34 basis points.
In Europe, German yields steadied but remained on track for their biggest weekly drop since the European Central Bank’s meeting at the end of October, as the stock market wobble pushed cash towards safe-haven assets.
Oil prices rose but remained en route for their first week of losses in six, as concerns grew over Russia’s support for an extension of the crude output cuts that have bolstered prices in recent months.
US light crude rose 1.6 per cent to $56.03 a barrel, but still within its trading range in the past couple of days. Brent futures hit a two-week low of $62.08 a barrel but last stood 1.2 per cent higher at $62.10.