World stocks ride to record high, dollar retreats

Expectations of fiscal stimulus in US supporting gains

Analysts say markets seem comfortable with the prospect of US interest rate rises. Photograph: Bloomberg

World stocks hit an all-time high on Thursday as the latest round of robust global data matched hopes that major economies such as the US will soon be serving up large helpings of fiscal stimulus.

MSCI's All Country World index, which spans 46 countries, notched the milestone as Wall Street hit its latest record last night and Asia and Europe consolidated the roughly 10 per cent gains both have made since mid-December.

There were surges in exports from Indonesia and Taiwan, falls in unemployment in Europe from Sweden to the Netherlands while stronger US retail sales and inflation data on Wednesday came as Donald Trump again promised mass tax cuts.

"With the exception of politics, I have rarely seen such as network of positive signals," said ABN Amro's chief investment officer Didier Duret.


“There is a momentum, we don’t know when it will stop, but at the moment it is strong,” he said. “Investors are rather underinvested anyway and there is lots of cash so equities are the asset class of default in this environment.”

Another reason for the upbeat mood has been that, unlike in recent years, the prospect of US interest rate rises – which tend to set the bar for global borrowing costs – does not seem to be spooking markets.

The dollar is still down for the year despite a strong run over the past couple of weeks, while Treasury yields have barely risen, which has helped propel emerging market bonds, stocks and many currencies higher.

The dollar hit the brakes again on Thursday as the glow of the previous day’s upbeat data faded. US government bond yields eased too, taking German Bunds and Europe’s other benchmarks with them. Irish 10-year bonds inched up slightly.

Upcoming elections in the Netherlands, France, Germany and possibly Italy, have kept investors interested in “safe” government bonds particularly with anti-euro and anti-EU sentiment on the increase throughout the continent.

Markets will also get a better idea later of how much of an impact the recent rebound in euro zone inflation has had on the thinking at the European Central Bank when it publishes the minutes of its January meeting.

"The ECB minutes should provide more minutes on the extent of any hawkish dissent (to its stimulus programme)," Mizuho analysts said in a note.


In commodity markets, which have also been enjoying a strong year so far, oil prices recovered from a knock from data showing record high US crude and gasoline inventories.

Brent and US crude both inched up 0.3 per cent to $55.92 and $53.28 a barrel respectively, while gold prices also rose as the dollar drifted down.

Industrial bellwether copper, which has surged 30 per cent since late October, eased however to $6,028 a tonne after China’s overseas investment weakened. China is the world’s top copper user, but prices were supported by the prospect of supply disruptions in Chile and Indonesia.

The mildly weaker metals prices meant European shares couldn’t quite hold their ground either despite the sentiment boost from the new record high in global stocks.

Europe’s Stoxx 600 index was 0.3 per cent lower on Thursday morning but this year’s rally has been underpinned by the fact European company earnings are expected to grow 14 per cent this year, according to Thomson Reuters I/B/E/S data.

The Iseq was trading less than 0.5 per cent lower on Thursday.