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MARKET AND STOCK TRADING - SINGAPORE. World stocks scaled fresh record highs on Friday, while the dollar stuck near four-month lows before crucial payroll numbers that could underpin growing confidence in the world’s biggest economy.
Global equity markets have begun 2018 with their best week in more than a year, continuing last year’s rally that has seen volatility plunge and investors’ appetite for risk surge.
Data on Friday showing euro zone inflation slowing in December will also help bulls stay convinced central banks are not going to tighten monetary policy faster than expected.
MSCI’s gauge of stocks across the globe .MSCI was up 0.19%, above 524 points and at a record high.
The Swiss benchmark rose to an all-time high, and the British index moved to another record, supported by optimism over regional economic strength and gains in U.S. stocks overnight.
The pan-European STOXX 600 index was up 0.4%, holding at a two-month high. The first trading week of 2018 looks set to be the best for Euro zone stocks .STOXXE since May, as shares shrug off a stronger single currency.
“There is little impediment for continued gains whilst economic conditions that we’ve seen over the last few months continue, and there’s every reason to expect that to continue to be the case,” Ken Odeluga, market analyst at City Index, said.
Emerging market stocks .MSCIEF have had their best start to the year since 2006 and added to those gains on Friday.
The U.S. dollar failed to draw much strength from better-than-expected private payrolls data on Thursday and manufacturing numbers earlier this week, leaving the greenback around a four-month low against the euro.
Euro zone prices grew by 1.4% in December on a year earlier, a slower rate than in the previous month. That provides support for the European Central Bank’s decision to keep policy easy despite growing pressure from richer euro zone countries.
Still, with two U.S. interest rate hikes already baked into market expectations, traders believe there is more upside room for the euro as the ECB may move to rein in its monetary largesse faster than the market anticipates.
US Payrolls Due
Investors will also be looking closely at the monthly employment report in the U.S., along with average hourly earnings data, due at 1330 GMT.
The data could give some clues to the likely path for when central banks will tighten.
“Currency markets broadly know what the Fed is going to do this year but the ECB monetary policy may be the surprise package of 2018,” said Richard Falkenhall, senior FX strategist at SEB in Stockholm.
The dollar has weakened as U.S. long-term bond yields have remained low, despite the Federal Reserve increasing interest rates three times last year.
The 10-year U.S. Treasuries yield stood just above 2.46% US10YT=RR, below its seven-month peak of 2.504% touched on Dec. 21.
Those levels are little different from about a year ago, even with market expectations for another three hikes in 2018.
Expectations that inflation will remain low as wage growth has been slower than before the 2007-2008 financial crisis has capped U.S. long-term bond yields.
Elsewhere, oil prices slipped from highs last seen in 2015 after soaring U.S. production undermined a 10% rally driven by tightening supplies and political tensions in Iran - from lows hit in December.
Gold prices XAU= dipped from the previous session’s 3-1/2 month high but remained on track for their fourth straight weekly gain.
Signs of investor appetite for risk more broadly were evident in Greece, where 10-year borrowing costs hit their lowest in 12 years on Friday.
The country, once on the verge of defaulting on its debts, has benefited from expectations of a clean exit from its bailout this year and a revival in the economy.
“Greece’s fundamentals have been on the mend and investors have been looking at the yield pick-up they get from investing in that debt,” said DZ Bank strategist Christian Lenk.
“Also, a rising tide lifts all boats - with the euro zone economy doing so well, it’s a very ‘risk on’ environment and that is benefiting Greece.”
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