Global equities advance in thin festive trade

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World stocks extended gains on Thursday to hit their highest level in almost three weeks, while oil advanced as investors entered the festive period in a positive mood.

The MSCI index of global stocks rose 0.5 per cent, taking its gains since January to more than 30 per cent, with Asian stocks the star performers.

The Nikkei 225 rose 1.5 per cent to its highest level in three months, while stocks in Shanghai jumped 2.6 per cent after Chen Deming, China’s commerce minister, said retail sales in the country had grown by more than 15 per cent in the past year.

In Europe, the FTSE Eurofirst gained 0.1 per cent, although many markets in the region, including those in Germany, Italy, Denmark, Finland, Spain, Sweden and Switzerland, were closed for the Christmas holidays.

“It’s Christmas Eve, the year is almost drawing to a close and what an exceptional year it has been,” said Lena Komileva at Tullett Prebon.

“The global economy has moved away from a deflationary environment and a 12-year low for equities in the first quarter to a state of stabilising output, recovering optimism, and booming asset markets supported by ultra-easy US monetary policy and a cheaper dollar.”

Oil advanced, with Nymex WTI climbing 0.4 per cent to $77.11 a barrel.

The dollar retreated, pulling back from a near four-month high on a trade weighted basis after weak US housing data in the previous session dented demand for the US currency.

“Insofar as this month’s turnround in the dollar was built around better than expected US economic data, which promoted the idea that US rate hikes could be on the horizon, it does seem likely that there will be room for disappointment on that front,” said Jane Foley at Forex.com.

“Not only are US interest rates likely to remain low for an extended period but with inflationary pressures very subdued, [but] the upwards trajectory of rates is likely to remain shallow once the Federal Reserve does begin to tighten monetary policy.”

The dollar index, which tracks the greenback’s progress against a basket of six leading currencies, fell 0.5 per cent to 77.535.

The dollar also lost 0.4 per cent to $1.4395 against the euro, fell 0.4 per cent to $1.6012 against the pound and dropped 0.3 per cent to Y91.32 against the yen.

Elsewhere, government bond prices were little changed in subdued trade, with Greek paper showing little reaction to news that the country’s government had pushed a budget through parliament which pledged to cut €8bn from its deficit.

The yield spread between Greece’s benchmark 10-year bond and that of the German bund has widened by 68 basis points to 242 points in the past four weeks as concerns over the government’s finances have risen.

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