Stocks Head For Another Week of Gains

World stocks were headed for their fourth week of gains in five on Friday after a surge in oil prices helped propel Wall Street’s three main indexes to co-ordinated record highs for the first time since 1999.

MSCI’s 46-country ‘All World’ index hovered at a one-year top as Europe’s main bourses ran out of momentum having briefly hit a post-Brexit vote high in opening deals.

It followed Wall Street’s landmark close and 1 percent plus gains in Tokyo and China overnight after some disappointing data there bolstered expectations that Beijing will be looking at its stimulus options again.

China’s fixed asset investment from January to July increased by 8.1 percent from a year earlier, the slowest rate in more than 16 years and below expectations for 8.8 percent.

July retail sales rose 10.2 percent, versus 10.6 percent the previous month and a forecast 10.5 percent. Industrial output slightly missed expectations as it came in at 6 percent, while new bank lending was also slower than estimated.

“You have got the triple highs in the U.S equity markets and that basically shows you that risk appetite remains buoyant,” said Societe Generale strategist Alvin Tan.

“The Chinese data didn’t have much of a market impact at all, and that speaks of a global macro environment that is very pro risk.”

Oil prices helped. They held onto the 4 percent gains made on Thursday after a Saudi oil minister hinted at possible joint action between producers to stabilize prices and the International Energy Agency said it expected oversupply to start easing soon. [O/R]

Global benchmark Brent crude LCOc1 climbed 0.3 percent to $46.18, set to end the week 4.7 percent higher and U.S. crude at $43.89 a barrel was on track for a 5 percent weekly rise.

“We are going to have a ministerial meeting of IEF (International Energy Forum) in Algeria next month, and there is an opportunity for OPEC and major exporting non-OPEC ministers to meet and discuss the market situation, including any possible action that may be required to stabilize the market,” Saudi Energy Minister Khalid al-Falih had said.

DATA DUMP

Back in Europe, there was reassuring news from the bloc’s largest economy Germany, where economic growth slowed less than expected in the second quarter thanks to solid exports and state and consumer spending.

Global markets will also sift through a slew of U.S. data, notably retail sales, due later in the session for latest cues about the world’s largest economy and whether it is robust enough to withstand further monetary tightening.

U.S. retail sales are expected to show a 0.4 percent monthly increase in July, according to the median estimate of 64 economists polled by Reuters.

In currencies, the dollar rose after San Francisco Federal Reserve President John Williams told the Washington Post that the U.S. central bank should raise rates this year because of improving labor market conditions and the likelihood that inflation is heading higher.

The dollar index, which tracks the greenback against a basket of six major peers, rose 0.06 percent to 95.913, but was on track for a loss of 0.3 percent for the week.

The New Zealand dollar slipped 0.2 percent after surging on Thursday to its highest in more than a year after its central bank cut interest rates by 25 basis points to 2.0 percent.

The Australian dollar dipped 0.2 percent, sapped by the data from China, the big buyer of its commodities, although it too was within touching distance of a year-high.

The rise in risk appetite weighed slightly on safe-haven gold. The precious metal inched up 0.1 percent to $1,339.86 an ounce after losing 0.6 percent overnight.

Euro zone bond yields also edged back from record lows as the rise in oil prices eased nagging deflation concerns and follow Williams’ Federal Reserve rate hike comments.

“Since we had that drop to a record low in July, German bond yields have been pretty stable and oil prices will have a role in where we go from here,” RBC’s chief European macro strategist Peter Schaffrik said.

Reuters

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell