World stockmarkets hovered close to all-time highs yesterday as the best start to a year in eight years showed little sign of running out of steam, with the combination of strong global growth and low inflation powering the appetite for risk, write Tommy Wilkes and Eamon Quinn.
Continental European shares jumped up to 0.4%, hitting their highest levels since August 2015, before easing slightly, but London’s Ftse-100 ended slightly lower. A surprise dip in German industrial orders appeared unlikely to dent growing confidence in the eurozone’s biggest economy.
The strong showing in European markets followed Asia, where benchmarks inched towards all-time peaks. The world index was flat, just below record highs. It has gained 2.5% in the first five trading sessions of the year, its best start since 2010.
A stronger pound hurt the Ftse, said Chirs Beauchamp, senior market analyst at online trader IG.
“Everyone now has their eyes squarely on earnings season, with the upcoming barrage of numbers from the US likely to slow the soaraway rally to a crawl,” he said.
The dollar partly recovered after a weak start to the year, strengthening past $1.20 against the euro, although with bearish positions against the greenback high, many traders are betting on a stronger single currency. Against a basket of currencies the dollar was up 0.31%.
Positive eurozone economic data has helped the euro, and investors globally wanting exposure to the economic recovery in the region have piled into European assets.
The synchronised global recovery has prompted central banks to follow the US Federal Reserve’s lead and start moving towards tighter monetary policy in recent months, supporting their currencies against the dollar.
“The overall trend is minutely supportive for the US dollar as we are seeing a global recovery led by China and Europe and there is a lot of cash sitting on the sidelines, waiting to buy European assets,” said Peter Chatwell, head of European rates strategy at Mizuho International in London.
France’s Cac-40 ended 0.35% higher in the latest session and Germany’s Dax ended over 0.4% higher.
“Growth in the euro area has outpaced the US for the past two years now and on our forecast this out- performance will extend to four years,” JP Morgan analysts said, calling such a scenario “unprecedented”.
- Reuters and staff of Irish Examiner