By Herbert Lash and Simon Jessop
NEW YORK/LONDON (Reuters) – Gold prices hit a seven-week high and global stocks scaled new records on Friday after strong U.S. and Chinese economic data bolstered expectations of a solid global recovery from the coronavirus pandemic.
Government stimulus, strong corporate earnings from U.S. banks and in Europe, along with signs of economic recovery in countries leading the COVID-19 vaccination race have all helped push stock market indexes to new heights this week.
MSCI’s broadest gauge of world stocks rose 0.42% to an all-time peak, lifted by surging European shares and lesser gains on Wall Street where both the Dow Industrial and benchmark S&P 500 posted their fourth week of successive gains.
As long as the strong economic rebound, tremendous fiscal and monetary support and progress on vaccine distribution remain in place, markets can grind higher, said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.
“Investors and market participants continue to underestimate both the economic and earnings recovery,” he said. “The earnings numbers have continued to exceed expectations by a very wide margin.”
First-quarter earnings are expected to rise 30.9% from a year ago, the highest since late 2010 when the economy was pulling out of financial crisis, according to Refinitiv data.
U.S. homebuilding surged to nearly a 15-year high in March, the Commerce Department said on Friday, adding to robust retail sales data the prior day, suggesting the economy was roaring.
In Europe, the pan-regional STOXX 600 index closed up 0.9% at a new peak, while Germany’s DAX gained 1.3% to hit an all-time high and the UK’s FTSE 100 rose 0.5% to close at more than one-year highs.
On Wall Street, the Dow Jones Industrial Average rose 0.48% and the S&P 500 gained 0.36%, both setting new highs. The Nasdaq Composite added 0.1% as declines in the information technology sector weighed.
German car and truck maker Daimler rose 2.7% as higher vehicle prices and strong demand in China helped it post a better-than-expected surge in quarterly operating profit.
“As the economic re-opening accelerates in the coming months, we believe the bull market remains on a solid footing,” said Mark Haefele, chief investment officer, UBS Global Wealth Management.
Chinese data showing record 18.3% growth in the first quarter drove Asian shares higher, though the reading slightly undershot expectations. Retail sales bounced strongly last month.
Asian markets rallied overnight on the news. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.4% and Shanghai shares added 0.8%. Japan’s Nikkei edged up 0.1%.
“As the U.S. economy and then European economies open up, it should further help Asian exports. This should support emerging market and APAC equities as well as China equities and fixed income,” said Sebastien Galy, senior macro strategist at Nordea Asset Management.
Gold prices posted their biggest weekly percentage gain, about 4.5%, since early November as the slide this week in Treasury yields and a weaker dollar brightened the metal’s appeal.
U.S. gold futures settled 0.8% higher at $1,780.20 an ounce.
The dollar slid to a 4-week low against a basket of currencies after the sharp drop in Treasury yields on Thursday, as investors increasingly accepted the Federal Reserve’s vow to keep an accommodative policy stance for longer than expected.
The dollar index fell 0.14%, with the euro up 0.13% to $1.198. The Japanese yen weakened 0.02% versus the greenback at 108.78 per dollar.
The yield on U.S. 10-year Treasuries rose 6.6 basis points in a late surge to 1.594%, rebounding from multi-week lows hit the prior session.
Oil fell slightly after a week of gains built on strong U.S. and Chinese economic data that offset concerns about rising COVID-19 infections in other major economies.
Brent crude futures settled down 17 cents at $66.77 a barrel and U.S. crude futures fell 33 cents to settle at $63.13 a barrel.
Graphic: Global asset performance http://fingfx.thomsonreuters.com/gfx/rngs/COMMODITIES-ASSETS/010031B62XZ/index.html#section/assets
Graphic: World FX rates http://fingfx.thomsonreuters.com/gfx/rngs/GLOBAL-CURRENCIES-PERFORMANCE/0100301V041/index.html
(Reporting by Herbert Lash, additional reporting by Simon Jessop in London; Editing by Angus MacSwan and Chizu Nomiyama)