Global equity benchmarks and oil prices rose on Friday while safe havens such as the dollar and US Treasuries dipped as hopes for a global economic recovery overshadowed the continued blockage of one of the world’s most vital shipping lanes.
More than 30 oil tankers are waiting to traverse the Suez Canal, which has been blocked since Wednesday after a container ship ran aground. It may take weeks to free the beached vessel, though analysts said that low seasonal demand for oil may mitigate the impact of the blockade.
The dollar rose to a new nine-month high against the Japanese yen of 109.44 yen, reflecting investor expectations of robust US economic growth as it accelerates its vaccine rollout. Overall, the dollar index edged 0.013% lower against a basket of six currencies, with the euro up 0.14% to $1.1781.
“We left 2020 with the validation of the consensus view the dollar would weaken,” said Vincent Manuel, chief investment officer at Indosuez Wealth Management.
“We have woken up in 2021 facing the reality that the U.S. is growing much quicker than Europe … so we have a massive divergence.”
MSCI’s gauge of stocks across the globe gained 0.65% following broad gains in Europe and Asia.
Business morale in Europe’s biggest economy, Germany, is back to its best in almost two years thanks to recovering global demand for manufactured goods, data on Friday showed.
In morning trading on Wall Street, the Dow Jones Industrial Average rose 132.6 points, or 0.41%, to 32,752.08, the S&P 500 gained 13.94 points, or 0.36%, to 3,923.46 and the Nasdaq Composite added 24.58 points, or 0.19%, to 13,002.26.
Bond yields were slightly up on the day, but 10-year Treasuries were on track for their biggest weekly yield drop since June.
Benchmark 10-year notes fell 16/32 in price to yield 1.6689%, from 1.614% late on Thursday.
Weekly money flow data from Bank of America showed global investors have been darting for safety this week amid concerns over rising coronavirus cases in Europe and the potential for global shipping to slow given the blockade of the Suez Canal. They pumped $45.6 billion into cash funds, the largest since April 2020 when COVID-19 was spreading fast.
Turkey’s markets were struggling to settle after the lira’s near 10% slump triggered by President Tayyip Erdogan’s latest central bank chief sacking, which has raised worries about a full-blown crisis that would require capital controls.
Blue chip Chinese stocks rebounded more than 2% though after a three-day losing streak, which, like emerging market shares generally, had left them at the lowest level of the year.
“All the sanctions (on China) so far have been largely symbolic and should have little economic impact. But the Sino-U.S. confrontation is affecting market sentiment. It could take some time for them to come to any compromise,” said Yasutada Suzuki, head of emerging market investment at Sumitomo Mitsui Bank.
China’s blue-chip CSI300 index rose on Friday and snapped a five-week losing streak, boosted by beaten-down consumer firms and strong inflows from foreign investors. At the close, the blue-chip CSI300 index was up 2.27% at 5,037.99 points. It rose 0.62% for the week, its first weekly gain after five straight weeks of losses. The Shanghai Composite Index closed 1.63% higher at 3,418.33. It rose 0.4% for the week after four straight weeks of losses. Consumer staples stocks, which have been heavily sold off in recent weeks, led gains. A sub-index tracking the consumer staples sector rose 2.53%, led by foreign investor favourites Kweichow Moutai Co Ltd, up 2.13%, and Wuliangye Yibin Co Ltd, up 3.89%. Refinitiv data showed strong inflows through the northbound leg of the Stock Connect as foreign investors bought shares. The financial sector sub-index rose 0.91%, the real estate index gained 0.45% and the healthcare sub-index jumped 3.88%. China’s central bank on Thursday reiterated its intention to keep liquidity reasonably ample and said monetary policy has to be flexible and precise. Concerns over tightening policy have weighed on investor sentiment in recent weeks. US stock indices were solidly higher on Friday, after government data showed no sign of rising inflation in February, soothing traders who feared government stimulus would cause the economy to overheat.
Bank stocks rose following the Federal Reserve’s announcement after trading finished on Thursday that most financial institutions could resume share buybacks and dividend payouts after June 30.
About 20 minutes into trading, the benchmark Dow Jones Industrial Average was up 0.4 percent at 32,739.99, and the broad-based S&P 500 0.4 percent higher at 3,925.69.
Commerce Department data released before markets opened showed income declining 7.1 percent in February and spending falling a more-than-expected 1.0 percent, as the effects of stimulus checks mailed out in February wear off.
“The key takeaway from the report is that spending decreased more than expected, indicating an inclination among consumers to continue saving,” Patrick O’Hare of Briefing.com said, noting that the savings rate retreated to 13.6 percent, about where it was before the checks were mailed out.
