Global shares take a hop on positive news

World stocks stayed close to record highs on Monday as investors weighed surging European business activity and a welcome US jobs report against worries about the highly transmissible Delta variant of COVID-19.

The STOXX index of 600 leading European companies was 0.3% higher, reversing earlier losses after data showed euro zone businesses expanded activity at the fastest rate in 15 years in June.

Activity for British services firms also soared in June, albeit at a slightly slower rate.

Britain’s FTSE was up 0.5% ahead of an announcement by Prime Minister Boris Johnson at 1600 GMT expected to confirm an end to COVID-19 restrictive measures in England on July 19.

French shares also recouped losses sustained after Health Minister Olivier Veran warned that France could be heading for a fourth wave of the pandemic due to the Delta variant.

COVID-19 angst also weighed on shares in Japan: The Nikkei fell 0.6% to a two-week low following a surge in infections in Tokyo, just weeks before the city hosts the Olympics.

Japan’s services sector activity shrank for the 17th straight month in June, a survey showed.

MSCI’s broadest index of Asia-Pacific shares outside Japan was flat.

China’s blue-chip stock index recovered from earlier losses to close 0.1% higher as pledges by Beijing to continue policy support for its tech sector helped counter worries about a crackdown on ride-hailing giant Didi Global and scrutiny of other platform companies in the country.

The MSCI All Country World index closed at a record 724.66 last week, and was 0.1% higher on Monday.

Trading was thinner than usual with US markets closed for the extended 4th of July weekend.

“Markets in general are still trying to find their feet,” said James Athey, investment director, Aberdeen Standard Investments.

“Equities, of course, continue to shrug off or ignore anything that might be considered remotely negative as they continue their merry and complacent dance towards an inevitable reckoning.”


Photo used for illustrative purpose.

S&P 500 futures signalled a flat open for Tuesday, after the index closed 0.8% higher at a record on Friday. The Dow Jones Industrial Average rose 0.4% and the Nasdaq Composite added 0.8%. setting another record.

US non-farm payrolls increased by a bigger-than-expected 850,000 jobs last month, data on Friday showed. But the unemployment rate unexpectedly ticked up to 5.9% from 5.8%, while the closely watched average hourly earnings, a gauge of wage inflation, rose 0.3% last month, lower than the consensus forecast for a 0.4% increase.

“The goldilocks print suggests there is no need to accelerate the tapering timeline or the implied rate hike profile,” Tapas Strickland, an analyst at National Australia Bank, wrote in a client note.

“Overall the level of payrolls is still 6.8 million below pre-pandemic February 2020 levels, and is still below the level of substantial progress needed by the Fed. As such there is nothing in this report for the Fed to become hawkish about.”

Eyes will be trained on the minutes of the Federal Open Markets Committee meeting from last month, when policymakers surprised markets by signalling two rate hikes by the end of 2023.

Commentary by Fed officials since then has been more balanced, particularly from Chair Jerome Powell, as investors parse Wednesday’s release for further clues on the timing of policy tightening.

Euro zone government bond yields nudged higher but analysts expect the recent downward trajectory to resume after the US payrolls data.

Germany’s 10-year Bund yield was up by one basis point at -0.222%.

The dollar dipped against a basket of major currencies on Monday, after hitting a speed bump when last week’s mixed bag of U.S. labour data allayed investor fears about a faster end to monetary stimulus.

While the headline June job creation figure beat forecasts, unemployment ticked higher and workforce participation didn’t budge - suggesting positive progress, but space for the Federal Reserve to wait before tapering asset buying or hiking rates.

Bonds rallied, Stocks rose and the dollar slipped in the wake of the data - dropping most against the risk-sensitive Australian and New Zealand dollars and the rates-sensitive yen.

While attempting a bounce in Asian and early European trading, by midday in London the greenback had fallen back to its lowest levels since Wednesday .

It gained about 0.2% against the kiwi, which sat at $0.7022, traded 0.05% lower at 110.94 yen and was last flat at $1.1863 per euro.

U.S. markets were closed on Monday for the Independence Day holiday.