World stocks march to 28-month peak

2011-01-13 12:02

London - World stocks climbed to a new 28-month high despite weakness in Europe on Thursday while the euro held on to the previous session's gains ahead of key debt auctions in Spain and Italy.

Wednesday's smooth sale of Portuguese bonds took the edge off concerns about the ability of debt-strapped eurozone issuers to fund themselves.

But two new tests are looming. Spain is due to issue up to €3bn of five-year bonds on Thursday, with Italy set to offer €7bn of 5 and 15-year government bonds.

Both auctions were expected to be relatively successful and markets were generally calm ahead of a European Union finance ministers meeting next week that is likely to address new support mechanisms.

Promises from China and Japan to support Europe through its fiscal crisis have also helped ease worries about the eurozone's financing troubles.

One result has been a rebound in the euro from recent lows. It hit a one-month high against the Swiss franc on Thursday, for example, and was above $1.31, compared with recent trading below $1.29.

"We're wary of positioning for euro downside too aggressively because there seems to be more and more news that Germany and France are going to push through some emergency resolution package," said Geoffrey Yu, currency strategist at UBS.

"So the euro could rally going into this."

The European Central Bank meets later in the day but is expected to keep interest rates unchanged at 1%, leaving the focus on the ECB's bond-buying programme and an acceleration in eurozone inflation.

Buoyant stocks

Outside Europe, stocks were generally high, lifted by perceptions of an improving global economy and positive corporate earnings.

Intel is to report quarterly results later.

World stocks as measured by MSCI were up a quarter of a percent at a fresh 28-month high and emerging market stocks climbed to a 31-month peak.

This came despite losses in Europe, where the FTSEurofirst 300 lost 0.4% in what was likely to be profit-taking after a run that has given it a more than 3.3% gain this year.

"The strong bond auction in Portugal has calmed the markets ... with no major negative factors in sight," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management in Japan.

The Nikkei closed up 0.7%, at a new eight-month high.