Global equity markets rise on hopes of economic recovery

by Jonathan Adams
Global equity

The STOXX 600 index ended 0.6% higher, MSCI’s benchmark for global equity markets added 0.2% to end at 703.31, the Dow Jones Industrial Average gained 0.7% and the S&P 500 added 0.27%

Gold prices rose and a gauge of global equity markets closed not far from a record high on Monday as investors bet corporate results and U.S. data will underscore the strength of the economy’s rebound from pandemic-induced shutdowns.

The dollar eased against a basket of currencies as the yield on Treasury bonds retreated on data showing U.S. manufacturing activity grew at a slower pace in April.

The yield on the 10-year Treasury note traded 2.8 basis points lower at 1.6029% after a shortage of inputs likely restrained factory output as massive fiscal stimulus and rising COVID-19 vaccinations unleashed pent-up demand.

The dollar index dropped 0.3%, making gold more affordable for holders of other currencies, while sliding Treasury yields reduced the opportunity cost of holding non-interest-bearing gold.

In Europe, stocks ended higher after the European Commission (EC) outlined plans to loosen COVID-19 restrictions on tourism. Strong factory and retails sales data and a robust earnings season added to investor optimism.

The pan-European STOXX 600 index ended 0.6% higher and MSCI’s benchmark for global equity markets added 0.2% to end at 703.31, nearly 0.7% short of a record closing high hit last week.

On Wall Street, the Dow Jones Industrial Average (DJIA) gained 0.7% and the S&P 500 added 0.27%. The Nasdaq Composite shed 0.48%.

A slide in high-flying tech and related stocks – including Inc. pressured the Nasdaq, as growth-oriented shares slid and cyclical stocks sensitive to the recovery rose.

Markets in China, Japan and Britain were shut for public holidays, keeping trading volumes thin.

Earnings for S&P 500 companies are expected to rise 46.3% in the first quarter year-over-year, almost double the rate forecast at the start of April, Refinitiv IBES data shows.

Of the 303 companies that have reported so far, 87.1% have beat analyst estimates, or more than 20 percentage points above the long-term average, Refinitiv said.

German retail sales data for March came in far better than expected, underlining that a U.S.-led economic rebound is now gaining traction elsewhere.

But some economists think businesses may be getting ahead of themselves and are being influenced more by the success and speed of COVID-19 vaccination rollouts.

The data has been unrealistically strong in recent months – while the underlying economy is performing very well, manufacturing growth is not quite at the stratospheric levels the surveys imply, said UBS economist Paul Donovan.

A busy week for U.S. economic data is expected to show resounding strength, particularly for the ISM manufacturing survey and April payrolls.

Euro zone government bond yields reversed earlier gains to track U.S. Treasuries lower on the U.S. manufacturing activity.

The rise in Germany yields accelerated last week when German inflation advanced further above the European Central Bank’s (ECB) target, and U.S. data showed economic growth sped up in the first quarter.

This article is for information purposes only.
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