Tuesday, May 7, 2013

Global shares near 5-year high as central bank rally rolls on

Global shares near 5-year high as central bank rally rolls on

By Marc Jones LONDON (Reuters) - World shares hit their strongest in almost five years and Germany's Dax reached an all-time high on Tuesday, as signals top central banks will remain supportive of growth continued to drive markets. MSCI's global index, which tracks stocks in 45 countries, edged…
Reuters
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  • Global shares near 5-year high as central bank rally rolls on

    By Marc Jones | Reuters – 1 hr 46 mins ago
    By Marc Jones
    LONDON (Reuters) - World shares hit their strongest in almost five years and Germany's Dax reached an all-time high on Tuesday, as signals top central banks will remain supportive of growth continued to drive markets.
    MSCI's global index, which tracks stocks in 45 countries, edged past its June 2008 highs in Asian trading after Japan's Nikkei stock market, which had been closed on Monday, jumped in a delayed reaction to Friday's U.S. jobs data.
    The momentum continued in Europe, where the DAX <.gdaxi> hit a record as strong industrial data followed some unforeseen corporate cheer after what has been a fairly mixed first quarter earnings season in Europe.
    German industrial orders rose in March, confounding expectations of a drop after strong demand from the euro zone provided a boost. The economy ministry said it showed the sector was slowly coming out of a weak phase.
    The head of the European Central Bank had underpinned the positive mood on Monday by saying it was ready to trim rates again if needed, while Australia's central bank cut rates to a new low of 2.75 percent on Tuesday and suggested it may do more.
    "I think the markets are going to continue going higher. The S&P hit another record high yesterday," said Neil Marsh, strategist at Newedge.
    "From a very low base, everyone is fairly optimistic that things are going to improve and if they don't, you've got the added backdrop from (ECB President Mario) Draghi that he'll do whatever it takes to push the euro zone economy forwards."
    Draghi's comments that the ECB could cut rates, including pushing its deposit rate into negative territory, kept downward pressure on the euro although the stronger German data pushed it back above $1.31 against am easing dollar <.dxy>.
    While it would significantly ease monetary policy, negative rates would be a risky move for the ECB as they would effectively push banks to spend any spare cash they have rather than park it at the central bank.
    That continued to support bloc's periphery bond markets as midday approached, on the view that banks will choose to accept the higher risks attached to investing in Italian and Spanish bonds rather than lose money leaving it at the ECB.
    Spanish and Italian bond yields - a proxy for borrowing costs - were both slightly lower by 1030 GMT, while safe-haven German Bunds lost ground.
    "This year is a year where all market behavior is basically nonsense ... In an environment where you have the central banks pushing down all yield levels on whatever is supposed to be a fixed-income investment, this is really changing the game," said Didier Duret, Chief Investment Officer at ABN Amro.
    "I think there is a plot to inflate from the central banks and this is still unfolding, so we are in the paradigm where the central banks' actions are still the fuel for markets. For now I don't see any reason to worry (about equity markets falling)."
    RATE CUT HITS AUSSIE DOLLAR
    U.S. futures prices pointed to another positive start for Wall Street after Monday's fresh high for the S&P 500. <.spx><.n>
    The Australian dollar sank to a two-month low of $1.0170 after the central bank trimmed rates by 25 basis points, also helping Australian shares <.axjo> limit losses. Markets had priced in a 50-50 chance of a cut.
    Investors will scrutinize a batch of April data from China, the world's second-largest economy, for more clues on global growth. Chinese trade data is due on Wednesday, inflation on Thursday, and money supply and loan growth from Friday.
    Prospects the giant U.S. economy will lead global growth lifted any industrial commodities although persistent worries about demand from top consumers such as China tempered gains.
    Three-month copper traded on the London Metal Exchange was up 0.2 percent at $7,281 a metric ton (1.1023 tons), below a three-week high of $7,374 hit earlier in the day. Copper has risen by about 7 percent since Friday before the U.S. jobs data was released, though it remains around 5 percent below its April peak.
    Shanghai steel futures rose to a near one-week high early on Tuesday but kept near a five-month low.
    Crude oil prices slipped 0.5 percent to back under $105 a barrel as investors took profits after a recent surge in prices. Oil had gained sharply in Monday as Israeli air strikes on Syria escalated tensions in the Middle East, trumping worries about global demand. Oil has also been supported by the hopes of a steady U.S. recovery.
    "There is some profit-taking coming in after the sharp rise in prices we saw in the recent days," said Tetsu Emori, a commodities sales manager at Astmax Investments in Tokyo.
    "The current fundamentals are very weak, with China slowing down and with U.S. demand not so strong," Emori added.
    (Additional reporting by Toni Vorobyova and Richard Hubbard; Editing by Catherine Evans)

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    Global shares near 5-year high as central bank rally rolls on

     
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