Markets soar on signs of global recovery

Tokyo — A batch of Chinese and US economic data helped underpin global stocks near record highs on Friday, as investors priced in a solid global recovery from the coronavirus-induced slump.

In Asia, markets were largely steady after China reported a sharp acceleration in first quarter growth, though the reading slightly undershot expectations while retail sales bounced strongly last month.

Shanghai shares dipped 0.2% while the Chinese yuan eased.

Analysts said the China data did little to change expectations of a strong recovery and further policy tightening to curb any excesses in property investments.

“Property investments were weaker but that’s no surprise given policymakers have been tightening loans to the sector while consumption is continuing a normalisation,” said Ei Kaku, senior strategist at Nomura.

“On the whole the data is unlikely to have a big impact.”

MSCI’s broadest index of Asia-Pacific shares outside Japan was off 0.2% while Japan’s Nikkei was almost flat.

MSCI’s broadest gauge of world stocks ticked down 0.05% by mid-Asian trade after 0.89% gains the previous day to a record high.

“US economic data released yesterday was all strong, confirming the US economy is firmly on a recovery track,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

US retail sales rebounded 9.8% in March, the largest increase since May 2020, in a gain that pushed the level of sales 17.1% above its pre-pandemic level to a record high.

The brightening economic prospects were underscored by other data, including first-time claims for unemployment benefits tumbling last week to the lowest level since March 2020.

Despite strong data, US bond yields dropped, in part driven by Japanese buying, as they began a new financial year this month.

The 10-year US Treasuries yield dropped to 1.529%, a five-week low, on Thursday and last stood at 1.578%, off its 14-month high of 1.776% set at the end of March.

“The market has already fully priced in an US economic recovery in the near term. And if the Federal Reserve will keep interest rates on hold for the next two to three years, no doubt the carry of US bonds would be very attractive compared with Japanese or eurozone bonds,” said Chotaro Morita, chief fixed income strategist at SMBC Nikko Securities.

The fall in long-term bond yields benefited stocks, and particularly tech shares, given the idea that their historically expensive valuations can be justified because investors would have no choice but to buy shares to make up for low returns from bonds.

On Wall Street, the S&P 500 advanced 1.11% while the tech-heavy Nasdaq Composite added 1.31%, nearing its record peak set in February.

In the currency market, lower US yields were a drag on the dollar.

The euro stood at $1.1951, having hit a six-week high of $1.19935 overnight while the US currency slipped to a three-week low of 108.61 yen and last traded at 108.89.

Oil prices held firm after hitting a four-week highs on Thursday after positive US economic data and higher demand forecasts from the International Energy Agency and Opec.

Brent futures stood flat at $66.89 a barrel, while US crude was also little changed at $63.36 a barrel, both on course for their first substantial weekly gains in six.

Reuters