Stocks consolidate post-crisis peaks

Wall Street closes at best levels in almost four years

Friday 20:15 GMT. Investor optimism supported stock benchmarks at post-financial crisis highs, though bulls seem to be a tad less gung-ho at the end of another positive week.

The FTSE All-World index closed 0.4 per cent higher at a fresh seven-month peak, having gained 2 per cent over the past five sessions and 12 per cent in 2012.

On Wall Street, the S&P 500 managed to close slightly higher at 1,404.16, its best level since June 2008 – though its advance was held in check by below-forecast data covering US industrial production for February and March consumer sentiment.

The dollar index fell 0.4 per cent – after US consumer price inflation in February was softer than expected – and the euro is up 0.8 per cent at $1.3178.

But commodities were mostly in demand, with copper gaining 0.2 per cent to $3.90 a pound and Brent crude advancing 2.8 per cent to $126.09 a barrel.

Firmer oil and financial groups helped the FTSE Eurofirst 300 to rise 0.5 per cent, bucking a 0.2 per cent dip for the FTSE Asia Pacific index, where a touch of mild profit-taking took hold.

Still, Friday’s meek surveys aside, investors have been buoyed by hopes that the US economy is gaining traction. A report on Thursday showed weekly jobless claims remaining at a four-year low, while a reading on New York state manufacturing activity unexpectedly rose.

Sentiment has also been boosted by easing eurozone sovereign bond contagion fears after a deal to restructure Greece’s debt was agreed and following the European Central Bank’s €1tn injection of cheap long-term loans, which reduced financial system tensions. Italian 10-year bond yields were trading at 4.88 per cent, down from more than 7 per cent in January.

Another factor believed to be supporting risk asset valuations in recent months is the realised and expected largesse of many of the world’s central banks.

But there may be evidence that the degree of importance attached to this prop – particularly with regard to hopes of further quantitative easing by the US Federal Reserve – is being revised by some investors.

This can be seen in the US Treasury market, where yields on benchmark bonds have broken through the top of long-established channels and are hovering near five-month highs as traders pare forecasts for more Fed intervention as the economic conditions improve.

“A repricing of the US monetary policy outlook has already started,” say Lloyds Banking Group strategists in a note. Ten-year Treasury yields ended the week at 2.29 per cent on Friday, after touching 2.35 per cent. Similar moves higher have been witnessed for other perceived havens, such as gilts and Bunds, which yielded 2.06 per cent for the first time since mid-December.

Earlier in Asia, Tokyo’s recent good run was placed on pause after exporters lost momentum as the yen regained some poise against the dollar. The Nikkei 225 rose 0.1 per cent.

Carmakers and auto parts makers were hit by profit-taking in Seoul after a run-up ahead of the free trade agreement between South Korea and the US taking effect on Thursday. Shipbuilders also were under pressure and the Kospi index shed 0.5 per cent.

Additional reporting by Jamie Chisholm in London

……

Trading Post.

Gold bugs’ hunger is sated by picking from an eclectic buffet containing market angst, market optimism, inflation fears, deflation fears and dollar weakness, writes Jamie Chisholm.

Mathematicians say the first four factors cancel each other out, leaving the buck. Now that looks to be on the turn.

It is less to do with the dollar’s day-to-day value per se, and more expectations for greenback debasement if the Federal Reserve provides more quantitative easing.

But expectations for QE3 are being reined in. Bond yields are moving higher, raising the opportunity cost of parking cash in a metal that offers no worthwhile income.

Gold is back below its 200-day moving average of $1,682 an ounce and chart technicals look dodgy.

The $1,800 level has provided resistance twice in the past four months and bullion sits less than $60 above what is starting to look like important support at about $1,600.

On Friday the yellow metal is down 0.1 per cent to $1,657 as news that India is to double its import duty on bullion raises concerns about falling physical demand.

But the gold price’s relative strength index is 38, according to Reuters, not yet in the “oversold” region marked by dropping below 30.

The market is not, however, showing signs of undue concern. The CBOE’s Gold Vix index is 18.1, against a three-year average of 22.3.

……

Copyright The Financial Times Limited 2016. All rights reserved. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

More on this topic

Suggestions below based on Markets