GLOBAL MARKETS – Stocks hit record highs as second half starts strong

Band Marc Jones

LONDON, July 1 (Reuters) – European financial markets got off to a good start in the second half on Thursday, with stocks pushing back a rapid re-acceleration of coronavirus cases in the region and the dollar and oil extending their strong first half rallies.

Early gains of 1% in London .FTSE, Frankfurt .GDAXI, Paris .FCHI and Milanese .FTMIB meant the pan-European STOXX 600 was set to join Wall Street at record highs. .UE

In a session in Asia thinned by a vacation in Hong Kong, the Nikkei of Japan .N225 fell 0.3% and the yen hit a 15-month low JPY = at 111.18 per dollar as the US currency continued its steady advance. FRX /

There were few signs of oil prices LCOc1 easing either. Brent rose nearly 1% to just over $ 75 a barrel after a skyrocketing 45% rise in the first half of the year posted one of its best start to the year on record.

Eurozone government bond yields also edged up, with the latest economic data showing the 19-nation bloc’s manufacturing sector grew at a record pace last month, as companies saw the strongest rising raw material costs for more than two decades.

“The eurozone manufacturing sector continued to grow at a rate unmatched in the nearly 24-year history of the investigation in June, as demand increased with the further easing of COVID-19 containment measures.” said Chris Williamson, chief economist at IHS Markit.

“However, the rapidity of the recent surge in demand has led to a seller’s market, as capacity and transportation constraints limit the availability of inputs for factories, which in turn has pushed up industrial prices to a low. pace never seen before by the survey. “

The benchmark 10-year German Bund yield rose one basis point on the day to -0.19% DE10YT = RR. French, Spanish and Italian 10-year yields increased by a similar amount FR10YT = RR, ES10YT = RR, IT10YT = RR.

Most major economies have seen their yields on government bonds, which drive borrowing costs in their economies, rise sharply this year, betting that central banks will slow down the stimulus as a global recovery pushes inflation up. .

Due to a shortage of shipping containers and supply chains severely affected by the pandemic, the Eurozone data input price index fell from 87.1 to 88.5, by far the highest of the history of the investigation. Inflation in the bloc had fallen to 1.9% last month, according to official data released on Wednesday.

“The virus is still playing a role… although it’s hard to see a direction in anything right now,” ING economist Rob Carnell said on the phone from Singapore.

“There is a broad feeling that the dollar is not such a bad unit to hold,” he said, as traders also waited for US employment data on Friday for clues on the Federal Reserve’s next move.

“Everyone is a little nervous.”

TENSIONS IN TAIWAN

In China overnight, the stock markets had applauded the Communist Party’s centenary with a slight uptick, but a nationalist speech by President Xi Jinping in Tiananmen Square did little to quell geopolitical nerves and the yuan fell very slightly. weakened. CNY /

Data in Asia also painted a mixed picture, with the mood of Japanese manufacturers at its highest for two and a half years, but factory activity is slowing in the region – particularly in Vietnam and Malaysia – due to ‘a resurgent pandemic.

Slowing vaccination rates in Asia and extending restrictions to curb the spread of the virus – along with a regulatory crackdown on Chinese tech giants – have lagged regional markets this year.

The MSCI ex-Japan index closed the first half of the year with a gain of 5.8% versus global equities’ .MIWD00000PUS up 11.4% and a gain of 14.4% for the S&P 500, which posted its fifth consecutive record closing H1 on Wednesday. .NOT

However, it was Friday’s US wages that traders believed could shake markets from a sleep that has locked currencies in some of their tightest trading ranges in decades. US private wages beat expectations on Wednesday, although they are not a reliable guide to the broader indicators on Friday.

In addition to the lows currently set by the Japanese yen, the overnight dollar / yen implied volatility JPYONO = is at its highest for more than three months.

June was the best month for the dollar since Donald Trump was elected President of the United States in November 2016, said Lee Hardman, currency analyst at MUFG.

“The key trigger,” he said, “has been the hawkish shift in Fed policy. The more hawkish guidance has made market participants less confident that the policy will continue to be flexible. Fed in the years to come. “

The US dollar index = USD, which measures the greenback against a basket of six major currencies, hit 92,500, its highest since April. The yield on benchmark ten-year U.S. Treasuries US10YT = RR was up to 1.4747%.

In commodities markets, metal prices appeared to stabilize below May’s peaks as oil targeted multi-year highs hit earlier in the week. OR

Brent raw LCOc1 Futures were last up 1.31% to $ 75.60 a barrel.

Staple corn, which has jumped over 20% this year CV1, also prolonged a sharp rebound overnight, as disappointing US planting figures supported prices. GR /

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(Additional report by Tom Westbrook in Singapore; Editing by Kim Coghill)

((marc.jones@thomsonreuters.com; +44 (0) 20 7513 4042; Reuters messaging: marc.jones.thomsonreuters.com@reuters.net Twitter @marcjonesrtrs))

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