Global stocks hovered around an all-time high on Friday as investors balanced expectations that the economic recovery will remain robust with caution ahead of next week’s US Federal Reserve meeting.
The FTSE All-World index hit an all-time high earlier in the session before falling flat by midday in New York, taking the rise for the global equities benchmark to just 0.9 per cent so far in June.
Wall Street’s blue-chip S&P 500 index edged down 0.1 per cent, having hit a new record on Thursday, while the technology-focused Nasdaq Composite was flat.
Momentum was stronger across the Atlantic, where the Stoxx Europe 600 closed up 0.7 per cent to another record — the benchmark’s fourth consecutive week of rises. This followed an upgrade to growth forecasts for the eurozone by the European Central Bank on Thursday.
London’s FTSE 100 index rose by the same margin for its best weekly performance since early May.
“The economic data is all continuing to improve, but everyone was expecting it,” said Caroline Simmons, UK chief investment officer for UBS wealth management. “People are now waiting to see what happens with central banks.”
Next week’s Fed meeting will be closely watched after vice-chair Randal Quarles called for talks about trimming its $120bn of monthly bond purchases that have supported financial markets since March 2020.
“The Fed is likely to start talking about reducing asset purchases more openly in the next couple of months, with a view that they actually do some tapering next year,” Simmons said.
This week’s rally in US Treasuries ran out of steam. Traders were anticipating the Fed would look past strong inflation in the US and stick to its view that high price rises were a temporary effect of industries reopening.
The yield on the 10-year note was little-changed at 1.46 per cent on Friday, although it remained around its lowest level since early March. Germany’s equivalent Bund yield was also steady at minus 0.27 per cent.
Data on Thursday showed headline consumer price inflation in the US rose 5 per cent in the 12 months to May, the largest increase since 2008. Investors dismissed this jump “as being mainly due to pandemic-related price normalisation”, said Daiwa economist Chris Scicluna.
Credit Suisse, however, warned in a research note of an “elevated level of investor complacency”.
“Should another round of high inflation indicators prompt central banks . . . to indicate less patience to keep monetary conditions easy, markets could be caught rather off guard,” the bank said.
The dollar rose 0.6 per cent against a basket of peers, while the euro lost 0.5 per cent against the greenback to purchase $1.2096. Sterling weakened by the same amount to $1.4098.
Brent crude, the international oil benchmark, gained 0.5 per cent to $72.92 a barrel, its highest level since May 2019.
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