Stock markets are closing out a record-breaking week on a soft note as fresh record lows for short-term German bond yields and rallying gold prices reflect lingering eurozone political angst.

Moves in currencies are muted however, while energy prices give back some of their recent gains.

Hot topic
The Dow Jones Industrial Average, Wall Street’s price-weighted gauge of 30 US blue-chips, closed on Thursday at another record, while the benchmark S&P 500 finished within a fraction of its best ever level.

The Dow’s trundle to 20,810 secured a 10th day of gains that is its longest winning streak in 30 years, and takes its advance since the US election in November to 6.1 per cent and 26.2 per cent over the past 12 months.

Its rally has been propelled of late by hopes that improving global economic conditions will be further boosted by the Trump administration’s pledge to accelerate US growth.

To that end, Steve Mnuchin, the US Treasury Secretary, on Thursday said the White House wanted to pass “very significant” tax reform within the next six months. He argued that these cuts, combined with a curb on regulations, could boost US gross domestic product expansion to at least 3 per cent.

Investors also were cheered by the positive comments about president Trump’s pro-business stance which emanated from chief executives of some major US companies after they attended a series of seminars at the White House.

However, index futures suggest the Dow and S&P may dip fractionally on Friday, and this is discouraging other bourses to finish the week on a bullish note.

The FTSE All-World equity index, which on Thursday hit a record intraday high of 295.96, is down 0.1 per cent to 295.07 after a soft Asian session and a sour start in Europe.

The Euro Stoxx 600 is down 0.1 per cent as resources groups weigh.
Japan’s Topix fell 0.4 per cent, while Hong Kong’s Hang Seng lost 0.6 per cent and Australia’s S&P/ASX 200 was 0.8 per cent lower, weighed down by materials stocks after a sharp fall for some base metal prices overnight. China’s Shanghai Composite was an outlier, but only just as it added 0.1 per cent.
Fixed income
Sovereign debt investors appear not to share the economic optimism of their equity focused peers.

The yield on the US 10-year Treasury, which moves in the opposite direction to the bond price, is down one basis point to 2.38 per cent, a two-week low.

Equivalent maturity German Bund yields are off 2bp to 0.21 per cent, their most meagre offering since the beginning of January.

Indeed, 2-year German paper has fallen on Friday to a record low of minus 0.93 per cent, a level that many traders believe is caused by a scramble for supposed safety in case the anti-EU Marine Le Pen wins the French presidential election in May.

Such political angst may also partly explain recent strength in the gold price. The precious metal is up 0.4 per cent to $1,254 an ounce, its most expensive in three months.

Meanwhile, a surge in the price of bitcoin to $1,200 for the first time put it within striking distance of matching the cost of bullion.

Oil prices are giving back some of Thursday’s rally 1.3 per cent rally, which followed a report from the American Petroleum Institute that showed an unexpected drop in crude inventories last week. Brent crude, the international benchmark, is down 0.3 per cent to $56.43 a barrel, while West Texas Intermediate is slipping 0.4 per cent to $54.25.

Currency moves are relatively mild for the session so far. The US dollar index, which measures the buck against a basket of its peers, is off just 0.1 per cent to 100.91 as the euro, which doesn’t seem to share the political angst of the bloc’s bond markets, adds 0.1 per cent to $1.0591.

The Chinese renminbi is weaker by 0.1 per cent to Rmb6.8705 per dollar after US president Trump said Beijing was the “grand champions” of currency manipulation.
Additional reporting by Peter Wells in Hong Kong

Get alerts on Gold when a new story is published

Copyright The Financial Times Limited 2021. All rights reserved.
Reuse this content (opens in new window)

Comments have not been enabled for this article.

Follow the topics in this article