World stocks clocked up their 13th record high of the year yesterday, as relief at a temporary US government funding deal boosted already sky-high confidence about global growth and corporate earnings.
Wall Street futures were pointing to a steady start but records in Asia and 0.3-0.5 per cent gains on Europe’s biggest bourses after upbeat data from German and Britain, ensured the new year bull run rumbled on.
The International Monetary Fund revised up its global growth forecasts for 2018 and 2019 to 3.9 per cent, which would be the highest since 2011. There was also a lift from Japan as its central bank said it would keep stimulus flowing.
Global borrowing costs also eased as the Bank of Japan’s reassurances in Asia added to the relief that US lawmakers had struck a short-term deal on Monday to fund the government through to February 8.
It resolved what had been a three-day shutdown in Washington and pushed yields on 10-year US Treasuries – one of the biggest drivers of world borrowing costs – down for the first time in five days to 2.62 per cent.
European bonds followed suit with Spain’s 10-year bond yield dropping to a seven-month low at 1.36 per cent to cut its premium to ultra-safe German debt down to the leanest since March 2015. Yields move inversely to prices.
Major currencies stuck to the narrative too, for the most part.
The dollar edged up against the euro to $1.2240 though it failed to cling on to earlier gains against the Japanese yen and sagged back to 110.50 yen.
The other eye-catching currency market move came from Britain’s pound as it topped $1.40 for the first time since voters there chose back in 2016 to leave the European Union.
It is benefiting from both upbeat UK domestic data and hopes of a favourable post-Brexit deal with the EU.
On a year-to-date basis it up 3.5 per cent, making it is the best performing major currency, beating even the high-flying euro.
Meanwhile, oil prices rose yesterday, lifted by the prospect of healthy economic growth as well as supply restraint by a group of exporters around Opec and Russia.
US crude oil futures rose 0.6 per cent to $63.94 per barrel and Brent gained 0.56 per cent to $69.42 per barrel. Spot gold tacked on 0.2 per cent to $1,336.70 per ounce.