Stocks break records, oil reach highest since 2015

From Reuters - January 4, 2018

LONDON (Reuters) - Market bulls resumed their charge on Thursday, as strong data from the worlds biggest economies sent stock index records tumbling and oil prices to their highest since mid-2015.

In an apparent acceleration of last years global equity boom, MSCI's world index .MIWD00000PUS and London's FTSE .FTSE both set records in Europe, and the Dow Jones .DJI was expected to break the 25,000 barrier when Wall Street reopens. [.N]

Tokyo's Nikkei .N225 - Asia's biggest market - had earlier shot to its highest since 1991 with a 3.3 percent surge. [.T]Asia-Pacific excluding Japan .MIAPJ0000PUS scaled a decade-high peak as a fifth day of gains in China helped emerging market stocks .MSCIEF to a 6 1/2-year high as well [EMRG/FRX].

It is a continuation of the goldilocks story, said Michael Metcalfe, State Street Global Markets head of macro strategy. The main theme last year was strong growth and accommodative (monetary) policy, and the data we have had so far suggest that the growth is expected to accelerate, and without inflation.

The data published on Thursday reinforced expectations that solid world growth will boost demand for goods, including oil, and lift corporate earnings.

Chinas services sector activity hit its highest level in more than three years, manufacturing data from Japan came in strong and euro zone surveys showed the bloc enjoying its strongest run in nearly seven years.

IHS Markits Final Composite Purchasing Managers Index - considered a good overall growth indicator for euro zone - rose to 58.1 in December from 57.5 in November and up slightly from a flash estimate of 58.0.

A stellar end to 2017 for the euro zone rounded off the best year for over a decade, continuing to confound widely held fears that rising political uncertainty would curb economic growth, said Chris Williamson, chief business economist at IHS Markit.

Another factor behind the upbeat mood was that minutes of the Federal Reserves mid-December meeting released on Wednesday did little to change that view that it will stick to measured increases in U.S. interest rates.

They showed policymakers expect U.S. President Donald Trumps tax overhaul will to boost consumer spending but are still uncertain about the wider impact the stimulus would have on things like inflation.

Fed funds rate futures moved to price a 75 percent chance of a rate hike by March, compared with around 60 percent at the end of last year. But markets are still not fully pricing in the three rate increases many Fed officials expect this year.

The dollar climbed off a three-month low after the minutes but was backsliding before U.S. markets re-opened [/FRX]. The dollar was at 112.64 yen JPY= and the euro up 0.4 percent at $1.2063 EUR=. If the single currency gets above September's peak of $1.2092, it would return to ground last trod in early 2015.



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