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GLOBAL MARKETS-World shares hit new peak on stimulus hopes, oil gains

· 02/05/2021 13:46
GLOBAL MARKETS-World shares hit new peak on stimulus hopes, oil gains

MSCI ACWI hits record peak spurred by Wall Street

Earnings, U.S. stimulus hopes offset weak U.S. jobs report

Bond yields rise on increased inflation expectations

Global currencies vs US dollar https://tmsnrt.rs/2PmYOcE

By Herbert Lash

- A gauge of global equity markets scaled a new record on Friday on investor expectations of further stimulus from Washington and economic revival hopes that also lifted crude oil prices to nearly $60 a barrel.

MSCI's all-country world index .MIWD00000PUS, which captures equity performance in 50 countries but is heavily weighed to U.S. stocks, especially big tech, rose 0.63%. The benchmark was on track to post its best week in three months.

Longer-term U.S. Treasury yields rose after a Labor Department report showed U.S. jobs rebounded less than forecast in January, bolstering hopes Congress will approve President Joe Biden's $1.9 trillion COVID-19 relief package.

The closely watched employment report showed job losses in December and November were deeper than initially thought, underscoring the need for additional relief money. nL1N2KA34D

Gold rose as the dollar retreated slightly as investors will continue to bank on the greenback with Treasury yields rising.

Tom Hayes, chairman and managing member at hedge fund Great Hill Capital LLC in New York, said the market was looking through the short-term disappointment in the employment report.

"It's very hard to get too pessimistic about downward revisions when you have three tailwinds at your back, namely the stimulus, the vaccinations and (declining infection) cases and earnings," Hayes said.

Job losses are still concentrated in retail, leisure and hospitality and healthcare, particularly in healthcare and nursing homes, "so this is all COVID-related issues," he said.

As more people get vaccinated, jobs will come back, which is driving investor sentiment, Hayes said.

The Nasdaq and S&P 500 also hit new highs as stronger-than-expected corporate results in the fourth quarter and companies on track to post earnings growth for the first quarter instead of a decline have boosted sentiment. nL1N2K924P

The Dow Jones Industrial Average .DJI rose 0.31%, the Nasdaq Composite .IXIC added 0.56% and the S&P 500 .SPX gained 0.46%, led by Amazon.com Inc AMZN.O, Google-parent Alphabet Inc GOOGL.O and Tesla Inc TSLA.O.

The three companies, along with Apple Inc AAPL.O, Microsoft Corp MSFT.O and Facebook Inc FB.O, are the top six components of MSCI's all-country world index.

In Europe, stocks were little changed at the end of an upbeat week, whose sentiment cooled on the disappointing U.S. jobs data and declining German industrial orders.

The broad STOXX 600 .STOXX posted its best weekly performance since November, rising 3.5%, despite a lackluster session on Friday.

German Economy Ministry data showed domestic orders fell by 0.9% in December, while orders from abroad decreased by 2.6%. Contracts from the euro zone tumbled by 7.5%. nL8N2KB1KV

Despite trending lower against the euro and Japanese yen, the dollar headed for its best weekly gain in three months. The U.S. dollar index =USD stood near a two-month high, up 1.1% so far this week.

The dollar index =USD fell 0.551%, with the euro EUR= up 0.69% to $1.2045. The yen JPY= strengthened 0.19% versus the greenback at 105.35 per dollar.

Oil hit its highest level in a year, above $59 a barrel, supported by hopes of a quicker economic revival and supply curbs by the Organization of the Petroleum Exporting Countries and its producer allies.

Brent crude futures LCOc1 rose $0.42 to $59.26 a barrel. U.S. crude futures CLc1 gained $0.47 to $56.7 a barrel.

Government bond investors expect an uptick in inflation after the unemployment report. Breakeven rates on 10-year Treasury Inflation-Protected Securities (TIPS) US10YTIP=RR, which measure average annual inflation expectations for the coming decade, have jumped to 2.19%, the highest level since mid-2018.

The 10-year U.S. Treasury US10YT=RR note rose about 1 basis point to 1.1584%, after briefly rising to the highest yield since March.

The net read from the unemployment report is that it supports a steeper yield curve, said Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC in New York.

"The big thing is the curve," he said.

Bond yields rose in Europe as well, with Germany's 30-year government bond yield DE30YT=RR climbing back into positive territory for the first time since September.

MSCI's gauge of Asian shares outside Japan .MIAPJ0000PUS rose 0.4%, while Japan's Nikkei .N225 rallied 1.5%.

Global assetshttp://tmsnrt.rs/2jvdmXl

Global currencies vs. dollar http://tmsnrt.rs/2egbfVh

Emerging marketshttp://tmsnrt.rs/2ihRugV

MSCI All Country World Index Market Caphttp://tmsnrt.rs/2EmTD6j

Recovery in earningshttps://tmsnrt.rs/3oLYFfL

(Additional reporting by Imani Moise; Editing by Larry King, Kevin Liffey, Dan Grebler and Alex Richardson

For Reuters Live Markets blog on European and UK stock markets, please click on: LIVE/)

((lawrence.white@thomsonreuters.com; +44 20 7513 5083; @ReutersLawrence))