After their recent strong performance, European and U.S. stocks stabilized while global stock prices climbed to an all-time high as bulls anticipated central banks to continue with their current monetary policy.
World Stock Climb to a Record High
China’s manufacturing industry showed signings of picking up and helped to reinforce the largely optimistic market outlook.
The FTSE All-World stock index increased by 0.2% up to 285.82, which is a higher closing than the July mark of 285.76. Earlier, the index had peaked to a record 286.09.
At the close of the market on February 24, the S&P 500 declined by 0.1% to a new intraday high peak of 2,119.59. Meanwhile, the FTSE Eurofirst 300 declined by 0.1% down from a seven-year high.
The optimistic outlook came against the background of Janet Yellen’s testimony to the senate on February 24. Speaking to a House of Representative’s committee, the Federal Reserve chairwoman asserted that the U.S. central bank was not too keen on increasing interest rates.
Jim Reid, Deutsche Bank macro strategist said, “Overall, that was a fairly balanced tone from Ms. Yellen. Her testimony neither favors the doves nor the hawks but instead leaves the Fed flexible with no particular bias.”
The U.S. bond market reacted as though Ms. Yellen’s testimony took a dovish turn against what was expected, and this saw government yields fall steadily.
The Treasury bond with a 10-year yield continued with its steady decline by an additional 3 basis points down to $1.96% while bonds with a two-year yield surged by 1 basis point up to 0.61%.
The dollar index, which measures the value of the currency against other world currencies edged back by 0.3% down to 94.2, lower than its 11-year high of 95.48 recorded in January.
According to Michael Hanson, an economist at BofA-Merrill Lynch, Ms. Yellen’s testimony was strongly geared toward inflation as the main factor that should determine when an interest rate increase should take place. Hanson said the Fed was optimist about growth and employment outlook and for them the main concern is inflation rates.
“Every year, the Open Market Committee starts out with a positive outlook that a close to 2 percent inflation could happen in two years but this outlook slowly deteriorates. We are expecting the same trend for the economic projections in March which is why we think an increase will not take place until September.”
The MSCI All-Country World Index shot up to 434.4 a 0.2% increase from 434.27. The MSCI for emerging and developed markets has been up for its 11th day running, its longest upward performance since 2004.
Mitsushige Akino, an Ichiyoshi Asset Management executive said, “As long as this goes on, the MSCI index will just have to keep rising.”
The Stoxx Europe 600 Index rose by 0.2% to trade at a seven year high as Mario Draghi, European Central Bank President, made a 1.1 trillion euro announcement to purchase assets.
The gaining leaders on the MSCI All-Country World Index include the healthcare sector and commodities while utilities shares experienced a decline in all the ten industry categories.
At the start of January, the world stock market had 2,470 members from a total of 46 markets. Exxon Mobil, Microsoft and Apple Inc. are the largest stocks this year.
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