Stocks flirt with pre-Lehman crash levels
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Thursday 21:15 GMT. Global stocks are brushing their best levels in nearly 27 months, before the collapse of Lehman Brothers, as investors remain hopeful that better economic growth in 2011 will power equities yet higher.
The FTSE All-World index is up 0.1 per cent, at its highest point since September 2008, though commodities are mixed on selective mild profit taking.
Wall Street is down 0.2 per cent, after a slew of reports on durable goods orders, weekly jobless claims, home sales and consumer confidence failed to provide a boost.
Nevertheless, many investors remain convinced that the recent improvement in US data enhances the prospects for a more stable business environment at the start of the new decade, providing further upside for stocks and commodities.
Worries about the eurozone debt crisis have been placed to one side. A threat of “holy war” from North Korea has been received with bemusement rather than fear.
Thin trading and anecdotal evidence that some fund managers who have not had a great year were scrambling to catch the dregs of the Santa Rally have helped equities in major exchanges trundle relentlessly higher during December.
By close of play on Wednesday, the S&P 500 on Wall Street was up 6.7 per cent this month alone, while oil is once again above $90 a barrel.
But some red lights are flashing. The euro/Swiss franc cross, considered by many to be a proxy for nervousness toward the eurozone, though stronger on Thursday, is near a record low as investors have piled into the “haven” of the Swissie.
Meanwhile, the Vix index, which measures the cost of expected equity volatility in the US and is often referred to as Wall Street’s “fear gauge”, is hovering around 16 – having closed on Wednesday at the lowest level since the market peaked in mid-2007. Such complacency can make contrarians very nervous.
Asia-Pacific – Shares rose for a third day though trading was mixed and thin with Japan shut for a holiday.
Markets were unfazed as South Korea began a large-scale military exercise near the border with the North. Pyongyang has so far stopped short of threatening retaliation for the drill, which is being viewed as an effort by Seoul to boost its image following public criticism of the military’s tepid response to the North’s attack on the disputed Yeonpyeong island last month. The Kospi index fell just 0.03 per cent on soft technology stocks.
Hopes that an improvement in the US economy will add an extra boost to growth in 2011 is continuing to buoy sentiment, pushing the FTSE Asia-Pacific index up 0.3 per cent, close to the best levels since July 2008.
Australia’s S&P/ASX 200 rose 0.4 per cent to a six-week high, after Riversdale Mining climbed as much as 2.2 per cent to A$16.84 on the back of Rio Tinto’s formal $3.9bn offer.
China’s Shanghai Composite lost 0.8 per cent as oil refiners lost ground on concerns that operating costs would increase following recent gasoline and diesel price rises. Hong Kong’s Hang Seng was off 0.6 per cent and India’s Sensex is down 0.2 per cent.
Europe – The FTSE 100 breached the 6,000 level for the first time since June 2008 just before the close of trade but then lost some ground in the auction to finish up 0.2 per cent at 5996. Energy stocks continued their storming run. The FTSE Eurofirst 300 index is down 0.1 per cent, held back my some profit-taking in miners as industrial metals pare recent gains.
Forex – The Swiss franc saw some action late in the european session, suddenly dropping on vague rumours that the Swiss central bank might have intervened to weaken its currency. The Swissie is down 0.9 per cent relative to the euro at Sfr1.2583, with profit taking after a good run cited by more sober assessors of market action.
The euro continues to vacillate around its 200-day moving average at $1.31 and is today down 0.2 per cent at $1.3117 and off 0.6 per cent versus the yen to Y108.86. A downgrade of Portugal’s credit rating by Fitch has not helped sentiment.
The yen is up 0.8 per cent versus the dollar to Y82.92, but other than talk of year-end repatriation of funds in holiday-thinned markets, the market appears at a bit of a loss to explain the Japanese unit’s strength.
The dollar index is down 0.3 per cent at 80.47.
Rates – Benchmark US Treasuries are weaker, pushing 10-year yields up 4 basis point to 3.38 per cent.
Eurozone peripherals are mixed, with the 10-year notes of Portugal up 7 basis points to 6.62 per cent and those of Spain down 2 basis points to 5.41 per cent.
Commodities – Parts of the complex is seeing some mild profit taking, with copper down 0.4 per cent at $425.65 a pound. Oil up 1.1 per cent at $91.52 a barrel as the sharp fall in US inventories on Wednesday and the US and European cold snaps continue to provide support. Gold is down 0.5 per cent at $1,380 an ounce.
Concerns about supplies and fund buying pushed sugar to a 30-year high of 33.98 cents a lb.
Additional reporting by Song Jung-a in Seoul
This is the final FT Global Market Overview of the year. We will return on January 4.
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