FTG Blog - World stocks hit record high as upbeat data boosts confidence

World stocks hit record high as upbeat data boosts confidence

Global stocks hit a record high on Friday and Asian markets rose to their best levels in more than two years as upbeat data on U.S. manufacturing and employment and buoyant European factory growth boosted investor optimism.

The MSCI ACWI .MIWD00000PUS, an index of 46 stock markets in the world, hit a record high, having gained 0.5 percent so far this week.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 0.6 percent, led by gains in Korea .MIKR00000PUS, while Japan’s Nikkei .N225 gained over 1 percent to top the psychologically important 20,000-point level for the first time since August 2015.

“Market sentiment is very good. The strength in Wall Street shares will be a tailwind for the Nikkei as well,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

The Wall Street’s volatility index .VIX, which measures implied volatility of stocks and is often seen as investors’ fear gauge, fell below 10, near a decade-low touched last month, in another sign of investors’ confidence that markets will be stable at least for the time being.

The Institute for Supply Management said its barometer of U.S. factory activity edged up to 54.9 last month from 54.8 in April, while ADP reported private payrolls grew by 253,000 last month, beating analysts’ median forecast of a 185,000 increase.

These numbers overwhelmed weakness in auto sales and set markets up for solid numbers in the government’s payrolls data due at 1230 GMT.

Following the latest data, the Atlanta Federal Reserve upgraded its s closely-watched GDP Now forecast for the April-June growth a 4.0 percent annualized pace from 3.8 percent.

The specter of solid U.S. growth led traders to almost fully price in chances that the Federal Reserve will raise interest rates at its June 13-14 policy meeting. They also supported the outlook for possibly another hike by the year-end, likely in September.

That helped the dollar recover in the foreign exchange market, although traders also said concerns about U.S. politics could be capping its gains.

Former FBI Director James Comey will testify next Thursday before a U.S. Senate panel investigating Russia’s alleged meddling in the 2016 U.S. election, in a hearing that could add to difficulties facing President Donald Trump.

“People may be waiting for the payroll data. Or they may be looking beyond that and want to focus on political instability and next week’s testimony” said Kyosuke Suzuki, director of forex at Societe Generale.

The dollar JPY= gained 0.3 percent to 111.65 yen, extending its rebound from Wednesday’s near two-week low of 110.485 yen.

The euro EUR= slipped to $1.1217 from Thursday’s high of $1.1257, its highest in more than a week.

Europe’s manufacturing sector continues to expand at a solid pace. The IHS Markit’s Manufacturing Purchasing Managers’ Index for the euro zone rose to 57.0 in May, up from April’s 56.7 and its highest level since April 2011.

Further signs of recovery could prompt the European Central Bank to sound a little more optimistic on the economy at its June 8 meeting. It could raise its assessment of risks to balanced or begin discussing shift from its bias to ease policy, a Reuters poll of economists showed.

Elsewhere in currency markets, the offshore Chinese yuan CNH= eased 0.5 percent after having hit its highest level since October the previous day.

The yuan stepped back to 6.7868 to the dollar from Thursday’s high of 6.7245.

The currency has seen sharp upward moves since last week, when Moody’s downgraded China’s credit rating and Chinese authorities announced they were adjusting the formula used to set the daily yuan midpoint.

The latter change has been seen as a signal that China will no longer tolerate much depreciation against the dollar and is setting the currency on a firmer path.

Oil prices were dragged down by ongoing concerns over a global glut in crude supply despite a bigger-than-expected draw in U.S. crude inventories.

The Brent futures LCOc1 fell 0.5 percent to $50.39 per barrel, near its three-week low of $49.81 set on Wednesday.