Global stocks nearing record highs on trade hopes

FILE PHOTO: A man walks past an electronic stock quotation board outside a brokerage in Tokyo, Japan - Reuters

LONDON (Reuters): World shares made another push for a record high on Wednesday after US President Donald Trump said Washington and Beijing were in the final throes of inking an initial trade deal.

Early European trading was subdued, with MSCI’s all-country world index now within 0.4%, or two points, of its record high from January 2018.

London, Frankfurt, Paris and Wall Street futures all rose, and though Shanghai struggled after Chinese industrial company profits shrank, Australian shares reached record highs and Japan’s Nikkei drew support from the growing likelihood of extra fiscal stimulus.

A senior Japanese ruling party official said yesterday he believed the Government was striving to compile a supportive spending package worth about 10 trillion yen ($ 92 billion).

In currency markets, the dollar was stronger against developed and emerging currencies, with dollar/yen holding above 109 and euro/dollar steady at $ 1.10.

That was despite softer-than-expected US economic data on Tuesday, which showed a fourth straight monthly contraction in consumer confidence and an unexpected drop in new home sales in October. Sterling scuttled sideways as pre-election opinion polls showed some narrowing of the Conservative lead over opposition parties, although Prime Minister Boris Johnson is still favoured gain an overall majority.

The reaction to the polls squeeze has been modest as the prospect of another hung parliament raises the prospect of some form of coalition government made up of parties supporting a second Brexit referendum.

YouGov will release seat-by-seat predictions of the election outcome at 2200 GMT. The ‘multilevel regression’ and ‘post-stratification’ model accurately predicted the 2017 hung parliament, so it will be closely watched.

Polling is certainly not infallible though, Thu Lan Nguyen pointed out. Before the 2016 Brexit referendum, most surveys had predicted the UK would vote to remain in the European Union.

Another signal of the rising market confidence was the CBOE VIX equity volatility index .VIX, the so-called fear gauge, subsiding to seven-month lows.

It is now less than half the level it was in August, when US-China talks looked close to collapsing, and a third of last December’s level when stock markets were pulled lower by trade angst and rising interest rates.

China had seized on the plunge in borrowing costs to issue its biggest international bond ever on Tuesday.

Some analysts said a renewed fall in US and European bond yields this week also pointed to more mechanical explanations beyond trade for rising equity prices.

US Federal Reserve Chair Jerome Powell said on Monday that monetary policy was “well positioned” to support the strong US labour market.

In emerging mar

kets, traders were watching Brazil’s real, which fell to a record low, below the troughs of the 2015 recession, despite central bank intervention.

Among the main commodities, oil prices edged lower after reaching their highest since late September on the reassuring trade headlines. US West Texas Intermediate crude CLc1 was down 0.21% at $ 58.29 per barrel. Global benchmark Brent crude LCOc1 lost 0.11% to $ 64.20 per barrel.

Safe-haven gold changed hands at $ 1,458.33 per ounce on the spot market, down 0.2% on the day and heading for its worst month in almost three years after a 3.5% drop.