World shares still at record high on hopes of US stimulus package

London — World shares held at record highs on Friday, buoyed by growing prospects of a US economic stimulus package, while desire for riskier assets kept the safe-haven dollar at a 2.5-year low.

A bipartisan, $908bn coronavirus aid plan gained momentum in the US Congress on Thursday as conservative lawmakers expressed their support.

“A deal before the year-end looked almost impossible a while back, but now a package of about $1-trillion seems within reach,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

The US Federal Reserve is also expected to tweak guidance on its asset-purchase scheme later this month. The European Central Bank (ECB) looks certain to increase its bond-buying next week.

MSCI’s world share index ticked up 0.1% towards the previous day’s record high. It is set for a fifth straight week of gains, which have seen it surge 15%.

Asian shares hit their own record high overnight. MSCI’s broadest index of Asia-Pacific shares excluding Japan rose 0.82%, surpassing its November 25 high, led by gains in the tech sector. Japan’s Nikkei dipped 0.22% on profit-taking.

Europe then saw Britain’s FTSE 100 index reach nine-month highs and eurozone stocks at similar levels. German government bond yields — which move inversely to price — struck a three-day low of -0.557%.

The pound changed hands at $1.3116, having hit a three-month high on Thursday with traders hoping for a trade deal between the EU and Britain. But as talks continued to secure the Brexit deal before a transition period expires at the end of the month, a British minister said on Friday the talks were in a difficult phase, indicating chances of a breakthrough were receding.

France could veto a bad deal, a French minister said.

US payrolls

In New York, the S&P 500 erased earlier gains after the Wall Street Journal reported that Pfizer had cut in half the target for rolling out its Covid-19 vaccine because of problems in its supply chain. The damage did not last long, with S&P 500 futures gaining 0.19% in early Friday trade.

The focus now is on key US non-farm payrolls data at 1.30pm GMT, forecast to show a rise of 469,000 in November, according to a Reuters poll.

The upbeat mood saw the dollar lose ground to other major currencies.

“One of the elements of the better news we are getting, for instance about vaccines, is that it increases the attraction of risky assets and that reduces the appetite for the dollar,” said Éric Brard, head of fixed income at asset manager Amundi.

The euro rose 0.12% to $1.2155, near the highest levels of April 2018 that it reached the day before, and a weekly gain of 1.5%. The dollar was flat against a basket of currencies.

Emerging markets continue their gains. The Mexican peso, Brazilian real, Turkish lira, rand, Russian rouble and Polish zloty have all jumped 7% to 11% over the past month, adding to 5% to 12% leaps in China, Taiwan and Korea’s currencies since June.

In commodities, oil prices got an additional lift after oil  cartel Opec and its allies, including Russia (Opec+), agreed to reduce their deep oil output cuts from January by 500,000 barrels per day (bpd). They failed to find a compromise on a broader and longer-term policy.

The increase meansOpec+ would move to cut production by 7.2-million bpd, or 7% of global demand from January, compared with current cuts of 7.7-million bpd.

Brent crude rose as high as $49.92 per barrel, its highest price since early March, and last stood at $49.64, up 1.9%.

Reuters