World stocks hit their highest levels in over a week yesterday as expectations grew that the United States and China would open new trade talks, while an interest rate hike in Turkey supported the lira and global risk appetite.
The MSCI All-Country World index, which tracks shares in 47 countries, was up 0.4 per cent on the day by late trade in Europe. It had earlier risen as much as half a percent on the day, touching its highest since September 4.
Led by technology and auto stocks, the pan-European STOXX 600 index was up 0.2 per cent, set for its best weekly gains in seven weeks.
Tech stocks rose 0.4 per cent after Apple gained on Wall Street following Europe’s close on Thursday.
MSCI’s broadest index of Asia-Pacific shares outside Japan gained 1.2 per cent. Australian shares were up 0.6 per cent, Seoul’s Kospi rose 1.4 per cent and Hong Kong’s Hang Seng gained 1 per cent. Japan’s Nikkei stock index was 1.2 per cent higher.
Chinese shares fell, despite a short-lived bump from data that showed forecast-topping industrial output and retail sales data for August.
Other data showed real estate investment in the country fell in August, raising concern that a cooling property market could increase risks for China’s economic outlook as the trade environment worsens.
Uncertainty around the global outlook for trade was highlighted by the European Central Bank, which on Thursday kept policy unchanged as expected and warned that risks from protectionism were growing.
A sharp interest rate increase by Turkey’s central bank to support a tumbling lira boosted risk appetite in emerging markets. The bank hiked its benchmark interest rate by 625 basis points, to 24 per cent.
Currency crises in both Turkey and Argentina have stoked fears of contagion over the past several weeks, hammering emerging market assets from Indonesia to India to South Africa.
After rising as high as 6.1442 to the dollar, the lira eased to 6.1025 yesterday.
Turkish lira implied volatility gauges fell to their lowest levels in more than a month, as sentiment continued to improve.
The euro hit a two-week high, extending Thursday’s gains, after comments from ECB President Mario Draghi that focused on healthy domestic fundamentals, including rapid growth in employment and a rise in wages.
The pound reached a six-week high of $1.3139, up 0.3 per cent and set for its second biggest weekly rise of 2018.
The dollar eased 0.1 per cent against the yen to 111.89.
US crude was 0.4 per cent higher at $68.82 a barrel as Hurricane Florence reached the US east coast. Brent crude rose 0.1 per cent to $78.23 per barrel.
Spot gold gained nearly half a per cent to $1205.36 per ounce.