News Column

Equities hold at all-time high after bumper week

July 6, 2014



Oil and gold remain under pressure on Iraq and Ukraine unrest



World stocks were enjoying the view at an all-time high on Friday, lifted by a week of strong US economic data and promises from the European Central Bank that cheap money will be sloshing around for years.







European shares were marginally in the red as the dust settled from Thursday's forecast-busting US jobs data and ECB meeting, with investors taking the opportunity to lock in profits after the biggest week of gains since March.







A new three-year peak for Asian stocks overnight meant MSCI'sAll World share index, which tracks 45 countries, set its fourth consecutive record high, while the dollar, US bond yields and growth-sensitive copper were also up on the week.







"You can't fight the tape, it's as simple as that," said Justin Haque, a broker at Hobart Capital Markets, referring to the deluge of strong data this week, "It's a very bullish scenario." With Wall Street closed later for Independence Day celebrations markets were quieter than usual but there were still pockets of movement.







Yields on lower-rated euro zone bonds continued to fall as analysts combed the details of new long-term loans the ECB has lined up for banks, and after it said on Thursday it stood ready to print money if needed. The ECB will give banks the opportunity to borrow up to 1one trillion euros for four years at a rate of only 0.25 per cent from September in the hope they will lend some of that money to businesses and consumers.







"More liquidity in the system is a boost for bonds," said Peter Chatwell, fixed income strategist at Credit Agricole.







Portuguese bonds though, which have underperformed this week due to concerns about an investigation into holding companies of the country's largest bank, saw their yields edge up, with 10-year paper at 3.64 per cent. Stocks in Lisbon also took another pounding, down another 1.25 per cent on the day and one of only a handful of indexes in the world staring at a fourth straight week in the red.







Oil and safe-haven favourite gold were also under pressure as the unrest in Iraq and between Ukraine in Russia supportive factors for both in recent weeks remained in a lull.







Brent crude held steady above $111 a barrel but was set to post its biggest weekly loss since early January. US oil futures were down for a seventh straight day and heading for their longest such run since 2009.







"Supply fears are easing somewhat, but Iraq is setting a high floor on prices," said Victor Shum, vice-president of energy consultancy IHS Energy Insight.







Spot gold was up 0.1 per cent at $1,321.15 an ounce at 1008 GMT. It fell 1.2 per cent to a one-week low of $1,309.64 after the US nonfarm payrolls release on Thursday, but managed to claw back losses as the market expects more macro signs on the strength of the global economy, traders said.







MSCI's broadest index of Asia-Pacific shares outside Japan ended up 0.2 per cent, touching its highest levels since May 2011 after a weekly gain of 1.7 per cent. Japan'sNikkei stock average rose 0.6 percent to hit a 5-1/2-month high, and gained 2.3 percent for the week.







It came after US employment growth smashed forecasts and unemployment fell to near a six-year low of 6.1 per cent, effectively dispelling fears about the economy's health after a weather-hit start to the year. Reuters




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Source: Khaleej Times (United Arab Emirates)


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