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Stocks rally on upbeat outlook, dollar pares drop

Mar 12 2018 13:34
Samuel Potter, Bloomberg

European stocks advanced, tracking gains across Asian markets as trade-war concerns took a back seat to economic optimism following a report Friday of stronger US jobs growth. Treasuries edged lower and the dollar pared its decline while most commodities fell.

The Stoxx Europe 600 Index rose for a sixth day, poised for the longest winning streak since October, as utility companies set the pace. US equity futures joined the global rally, after gauges from Tokyo to Sydney jumped.

The yen strengthened as political clouds gathered around Japan’s Finance Ministry, run by a stalwart ally of Prime Minister Shinzo Abe. Part of Abenomics focuses on weakening the yen to boost the nation’s exports.

Strong economic indicators seem to have given fresh impetus to the nine-year-old bull market in global equities, which was roiled in recent weeks as President Donald Trump raised the prospect of a full-fledged trade war. With a slew of data due from China this week as well as readings on US inflation and retail sales, investors will be looking for more reasons to keep the party going.

"Our customers are still bullish," Chris Brankin, chief executive officer at TD Ameritrade Singapore, told Bloomberg TV. "You saw the jobs report last Friday, which was a perfect scenario - you had an uptick in wages, but not too much. Investors have taken that opportunity to buy the market dips and we look for the bull market to continue."

In Japan, a deepening political scandal is putting pressure on Finance Minister Taro Aso after his ministry altered documents tied to a controversial land sale. Aso has been Abe’s deputy since he took office in December 2012, and is seen as a key backer of the Abenomics program.

Elsewhere, Bitcoin was set for the first increase in five weekdays and West Texas crude nudged lower after last week’s advance. Emerging-market stocks surged.

Here are some of the key things happening this week:

China data on industrial production, retail sales and fixed-asset investment all out on Wednesday are likely to point to slower growth, according to Bloomberg Economics forecasts. Key indicators for the Fed dominate the economic agenda in the coming week.

Headline inflation may have edged up to 2.2% in February from 2.1%, though consensus before Tuesday’s report is for core inflation to remain at 1.8%. The US Treasury will sell $21bn of 10-year notes and $13bn 30-year bonds at March 12 to 13 auctions, plus $28 billion of three-year notes, the most since 2014.

Last month’s auction of those maturities drew lacklustre demand. Prices and factory output are focal points in the euro area. Friday’s second inflation report for February may touch 1.2% from 1.1% the previous month.

Also this week, Germany’s Angela Merkel is inaugurated to a fourth term, EU27 government officials discuss the European Union’s Brexit position, and UK Chancellor of the Exchequer Philip Hammond issues his spring statement.

And these are the main moves in markets:

Stocks

The Stoxx Europe 600 Index rose 0.4% as of 7:01 am New York time, with its sixth consecutive advance. Futures on the S&P 500 Index climbed 0.4% to the highest in more than five weeks.

The MSCI Asia Pacific Index increased 1.7% on the largest climb in 16 months.

The UK’s FTSE 100 Index rose less than 0.05%. The MSCI Emerging Market Index gained 1.2% to the highest in more than five weeks.

Currencies

The Bloomberg Dollar Spot Index decreased 0.1%. The euro rose less than 0.05% to $1.2311. The British pound increased 0.1% to $1.3861. The Japanese yen rose 0.2% to 106.56 per dollar, the largest advance in more than a week.

South Africa’s rand sank 0.3% to 11.8479 per dollar. The MSCI Emerging Markets Currency Index rose 0.1%.

Bonds

The yield on 10-year Treasuries climbed one basis point to 2.90%, the highest in more than two weeks. Germany’s 10-year yield dipped one basis point to 0.64%. Britain’s 10-year yield rose one basis point to 1.498%.

Commodities

West Texas Intermediate crude decreased 0.6% to $61.67 a barrel. Gold fell 0.5% to $1 316.75 an ounce, the weakest in a month.

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