Friday 21:00 GMT. US stocks climbed to record highs and their European counterparts closed at seven-year peaks at the end of a week in which equity bulls took encouragement from a ceasefire agreement in Ukraine and signs of growth in the eurozone.
In New York, the S&P 500 rose 0.4 per cent to a record closing high of 2,096, after hitting an all-time intraday peak of 2,097.03. The US equity benchmark was up 2 per cent over the week.
In Europe, the FTSE Eurofirst 300 rose 0.6 per cent to 1,502.82 — its best close since January 2008 — giving it a five-day gain of 0.8 per cent. The Nikkei 225 in Tokyo retreated 0.4 per cent from a seven-year high but was still up 1.5 per cent over the week.
Russian stocks and the rouble got a helping hand from the Ukraine peace deal — plus fresh gains for oil prices — although European politicians, and market analysts, were wary of putting too much faith in the agreement.
Moscow’s Micex stock index rose a further 2 per cent, taking its advance for the week to 4.7 per cent. The dollar was down 2.7 per cent versus the rouble at Rb63.54, while Brent crude rose 3.8 per cent to settle at $61.52 a barrel, up 6.4 per cent on the week and the highest level since late December.
Jim Reid, macro strategist at Deutsche Bank, noted that the latest Ukraine deal appeared to differ little from the initial ceasefire drawn up in September, which failed shortly after.
“Crucially, the agreement still fails to deal with the issue of the political status of eastern Ukraine and the lack of control that Kiev has over its Russian border,” he said. “Clearly this is still a fragile situation which could still generate headlines in the near term.”
Meanwhile, Tom Pugh at Capital Economics argued that oil prices were likely to continue to rise — but not surge.
“The recent bounce back in the price of Brent appears to have been driven by the sharp drop in the number of [US] rigs drilling for oil and the slew of announcements from major oil companies that they are cutting back on investment,” he said.
“However, high stocks and the potential for US shale producers to ramp supply back up quickly should prevent prices from surging. We expect Brent to end the decade at $70 a barrel.”
Greek assets ended a volatile week on a positive note, even after emergency talks between the country’s finance minister and his eurozone counterparts on the terms of Athens’ bailout broke down without agreement.
The ATG stock index rose 5.6 per cent, and ended with a weekly gain of 11.3 per cent, while the three-year Greek government bond yield, which brushed 22 per cent midweek, was down 264 basis points on Friday at 15.41 per cent, according to Bloomberg data.
Athens said it would make every effort to reach a deal at Monday’s scheduled eurozone finance ministers’ meeting, while the European Central Bank extended another €5bn in emergency loans to Greek lenders.
“EU officials should be able to reach a deal that keeps Greece in the euro area while also providing debt relief and easing austerity,” said Dario Perkins at Lombard Street Research.
“But the politics look tricky and the threat of ‘Grexit’ is not trivial. Global finance is less exposed to Greece than in 2010 and the EU has set up firewalls, yet the systemic implications would be uncertain.”
In spite of the uncertainty over Greece, other “peripheral” eurozone bond markets showed no sign of genuine contagion worries.
There was better news for the eurozone from data showing that the region’s economy grew 0.3 per cent in the final quarter of 2014, more than expected. German GDP rose 0.7 per cent.
“This represents the first sign of the more convincing recovery we expect to see in 2015,” said Nick Kounis, head of macro research at ABN Amro.
“The drop in oil prices, the lower euro and easing bank lending conditions bode well for growth, while the ECB’s quantitative easing programme should improve financial conditions further.”
The German 10-year Bund yield edged up 2bp to 0.35 per cent — leaving it 2bp down on the week. The equivalent maturity US Treasury was up 4bp at 2.03 per cent, and 9bp higher on the week, as the market continued to move to price in higher interest rates this year, despite weak US retail sales data.
The dollar index was up 0.1 per cent and still within sight of a recent 11-year high, while the euro was a shade lower against the UScurrency at $1.1400 — but up 0.8 per cent on the week.
The euro gave back some of the previous day’s rise against the Swedish krona that followed the Riksbank’s move to set a negative main policy interest rate.
Gold was up $6 at $1,228 an ounce but down $5 on the week.
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