NEW YORK/LONDON (Reuters) – World stock markets extended a five-day run of fresh highs on Thursday, fueled by upbeat earnings and strong U.S. economic data that herald a solid recovery ahead, while Russian markets tumbled at the prospect of the harshest U.S. sanctions in years.
Major stock indexes posted record highs, including MSCI’s global benchmark, Europe’s broad STOXX 600, the Dow Industrials and the U.S. benchmark S&P 500, as bonds yields tumbled.
The 10-year U.S. Treasury note slid below 1.6% to yield 1.563%, a fall of 7.4 basis points that helped spur renewed buying of big tech stocks in the biggest single-day decline in the benchmark’s yield in almost three months.
MSCI’s all-country world index of equity performance in 50 countries, which is heavily weighted to Apple Inc, Microsoft Corp and Amazon.com Inc, jumped 0.89% and is now up 8.6% for the year.
Growth stocks regained their footing, rising 1.7% against a 0.6% gain in value names on Thursday, as measured by the Russell 1000 indexes.
The Dow Jones Industrial Average rose 0.9% and the S&P 500 advanced 1.11%. The Nasdaq Composite added 1.31%.
Unlike a month ago when markets feared inflation, the plunge in Treasury yields suggests investors from Japan and elsewhere in Asia see deflation in the longer term once stimulus is gone and U.S. growth normalizes, said Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC in New York.
“Once those steroids are no longer being provided, the economy’s going to drop back to its trend and their point is, ‘Well, how are you going to get out of this deflationary bias with the dollar remaining firm?'” Ricchiuto said.
The dollar index rebounded after touching a four-week low, up 0.06% as the euro fell 0.09% to $1.1967. The Japanese yen strengthened 0.19% versus the greenback.
U.S. retail sales rebounded 9.8% in March, the largest increase since May 2020, in a gain that pushed the level of sales 17.1% above its pre-pandemic level to a record high, the Commerce Department said.
Separately, the Labor Department said initial claims for state unemployment benefits fell to a seasonally adjusted 576,000 for the week ended April 10, the lowest level since mid-March 2020 and 124,000 below economists forecasts.
Investors are increasingly convinced that U.S. interest rates will stay low, whereas in Europe a deluge of debt issuance lifted German bond yields to four-week highs. [GVD/EUR]
A new set of U.S. sanctions to punish Russia for alleged interference in U.S. elections, cyber-hacking and other “malign” acts battered the ruble and Russian state bonds, but analysts said they will not have a significantly adverse impact.
The ruble dropped as much as 2% and last traded 1.05% lower.
Turkey’s lira wobbled as the country’s central bank hinted that it will look to cut interest rates under a new governor after the last one was sacked after hiking rates last month.
Graphic: Russia and Ukraine risk gauges have been rising https://fingfx.thomsonreuters.com/gfx/mkt/yxmvjdrjnvr/Pasted%20image%201618412367931.png
Overnight in Asia the Nikkei ended little changed and Hong Kong and China’s main bourses finished 0.5%-0.6% in the red.
JPMorgan Asset Management said in a note it was trimming its overall emerging markets exposure once again, “mostly driven by a less sanguine outlook on EM Asia.” The bank had already recommended selling EM currencies earlier in the week.
The Australian dollar hovered near three-week highs at $0.7716 after posting its biggest one-day percentage gain since Feb. 19 on Wednesday. Its New Zealand peer was upbeat at $0.7147, a level not seen since March 23.
Gold jumped to its highest in more than a month as Treasury yields retreated. U.S. gold futures settled 1.8% higher at $1,766.80 an ounce.
Oil prices held near a one-month high following the strong U.S. economic data and higher demand forecasts from the International Energy Agency.
Brent crude futures settled up 36 cents at $66.94 a barrel. U.S. crude futures rose 31 cents to settle at $63.46 a barrel.
(Reporting by Herbert Lash, additional reporting by Swati Pandey in Sydney; Editing by Kirsten Donovan, Nick Zieminski and Dan Grebler)