World stocks hit another record, crude rises

Markets shrug off rising inflation concerns

LONDON:

Global stocks again hit a record high and oil rose on Tuesday, as markets shrugged off concerns about rising inflation and looked ahead to US data later in the week that should offer a major clue to the health of the world economy.

Risk markets have eked out gains in recent weeks as traders balance optimism that some key markets are reopening after pandemic-induced lockdowns with concern that rising inflation could prompt central banks to rein in stimulus programmes.

The recovery from Covid-19 also remains patchy in many parts of the world, with exports reviving but broader economic activity still dampened by measures to contain fresh outbreaks. Against that backdrop, May euro zone inflation came in higher than expected at 2%, driven by rising energy costs, above the European Central Bank’s target of below but close to 2% - and with even higher levels expected later in the year.

Later in the week, Friday’s US jobs data should also give a firmer steer on near-term Fed policy action.

In advance of that, MSCI’s broadest gauge of global stock markets rose 0.3% to a record high, led by broad gains across Europe’s leading indexes, with the Stoxx Europe 600 extending gains to trade up 1.1%.

“Although global stocks are now around 20% above pre-pandemic highs, a combination of strong earnings growth and reasonable valuations relative to still-low bond yields point to further upside for stocks,” said UBS Global Wealth Management Chief Investment Officer Mark Haefele.

Overnight, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.6%, hitting the highest in a month and taking total gains so far this year past 7%.

South Korean stocks rose 0.6% after a jump in May exports, and Chinese stocks climbed 0.2% after data showing factory activity expanded at the fastest pace this year in May.

Though US inflation data last week was above estimates, another big miss on the jobs front would delay prospects for any wind-down of stimulus, analysts say.

As traders awaited clues on Fed direction, the dollar hovered around flat against a basket of its major peers and the yield on US 10-year government debt was up 2 basis points.

Concerns about global inflation have driven gold up 8% this month to comfortably above $1,900, although the yellow metal gave up early session gains to last trade flat on the day.

Published in The Express Tribune, June 2^nd, 2021.

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