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GLOBAL MARKETS-Shares scale new highs, dollar falls on Delta anxiety

reuters.com · 09/01/2021 15:09
GLOBAL MARKETS-Shares scale new highs, dollar falls on Delta anxiety

Adds gold, oil settlement prices

MSCI ACWI, Nasdaq hit fresh highs

Investors shrug off weak Asia data

Dollar near three-week lows

Investors wait for U.S. jobs report

By Herbert Lash

- The dollar eased over concerns about slowing growth, but world stock markets scaled new highs on Wednesday, with investors looking beyond weak economic data to focus on a likely continuation of massive central bank stimulus measures.

MSCI's all-country world index .MIWD00000PUS climbed to its fourth intraday high in a row, while the Nasdaq Composite .IXIC hit a fresh high. The Euro STOXX 600 .STOXX came close to breaching an all-time peak reached three weeks ago and the S&P 500 .SPX toyed with touching a new intraday high.

The upbeat tone for equities came despite signs that Asia's factory activity lost momentum in August and that U.S. private employers hired far fewer workers than expected last month, likely due to a resurgence in COVID-19 infections. nL1N2Q30WG

But the U.S. labor market continues to recover, with private payrolls increasing last month by 374,000 jobs, or 48,000 more than in July, the ADP National Employment Report showed.

U.S. manufacturing activity also unexpectedly picked up in August amid strong order growth, providing markets a bit of optimism. nN9N2NL018

Many investors and other market participants expect central bank stimulus measures to remain and companies to report strong earnings despite a deceleration in economic activity.

"We're in the moment where it's still semi-Goldilocks - there is the inflation element that is still for the moment being discarded by central bankers," said Olivier Marciot, senior portfolio manager with Unigestion.

"Earnings are very good, macro is very strong and still the central banks are remaining very accommodative," Marciot said.

MSCI's all-country world index .MIWD00000PUS rose 0.46% and the broad STOXX Europe 600 index .STOXX closed up 0.48%.

On Wall Street, the Dow Jones Industrial Average .DJI slipped 0.08%, while the S&P 500 .SPX added 0.16% and the Nasdaq Composite .IXIC advanced 0.51%.

The dollar traded near its lowest point in nearly three weeks versus major peers as investors await the nonfarm payrolls report on Friday for clues to when the Federal Reserve begins paring its stimulus. Fed Chair Jerome Powell has said an improving labor market is a prerequisite for tapering to begin.

Worries persist, however, that the Delta variant is weighing on the economy, leading some to lower their estimates for U.S. jobs data on Friday, said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

"The recovery has been uneven but if nonfarm payrolls should also disappoint, that would seemingly close the door to an imminent taper and keep the dollar in a bit of a funk," he said.

The dollar index =USD, which tracks the greenback versus a basket of six currencies, fell 0.213% to 92.449.

The euro EUR= was up 0.32% at $1.1845, while the yen JPY= traded down 0.07% at $109.9400.

An Institute for Supply Management (ISM) survey highlighted persistent problems securing raw materials, a situation worsened by disruptions caused by the latest COVID-19 wave, primarily in Southeast Asia, as well as ports congestion in China.

The ISM index added to skepticism that the Fed will move any time soon on tapering its bond-buying program, Manimbo said.

"It's a vote of confidence in the Fed's dovish stance," he said.

Powell tried last week to distance the two concepts of the Fed tapering its bond purchases from when it begins to raise interest rates, said Kevin Flanagan, head of fixed-income strategy at WisdomTree Investments Inc.

"You have to give the Fed kudos; they've done a very good job with their forward guidance with respect to tapering," Flanagan said. "They've met their criteria on the inflation side, and now it's on the jobs number."

Markets are likely to remain quiet until Friday, with an attempt by bond traders to push yields on the 10-year Treasury above the 1.32% to 1.33% level unsuccessful, he said.

The benchmark U.S. note's yield US10YT=RR traded flat at 1.302%.

Government bond yields across the euro area touched their highest levels in around six weeks, pushed up by unease over the future pace of European Central Bank bond purchases.

Germany's 10-year Bund yield briefly touched its highest level in just over six weeks at -0.354% before steadying at around -0.365% DE10YT=RR. nL1N2Q30H2

U.S. crude CLc1 rose 9 cents to settle at $68.59 a barrel.

U.S. gold futures GCv1 settled down 0.1% at $1,816 an ounce.

Copper prices fell more than 2% after data showed slower factory activity in August.

World FX rates YTDhttp://tmsnrt.rs/2egbfVh

Global asset performancehttp://tmsnrt.rs/2yaDPgn

Asian stock marketshttps://tmsnrt.rs/2zpUAr4

(Reporting by Herbert Lash, additional reporting by Tom Wilson in London; Editing by Alex Richardson, Andrew Cawthorne and Jonathan Oatis)

((herb.lash@thomsonreuters.com; 1-646-223-6019; Reuters Messaging: herb.lash.reuters.com@reuters.net))

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