Dhara Ranasinghe
LONDON (Reuters) – Global stocks hit fresh record highs, buoyed by optimism about U.S. interest rate cuts ahead of key jobs data due later on Friday, while the euro hit a three-week high ahead of France’s general election this weekend.
The pound and British stocks rose as Britain’s Labour Party looked set to win a landslide victory after 14 years of Conservative rule.
European markets are shifting attention from the British election, whose outcome was widely expected on Thursday, to a second round of French elections on Sunday. French shares are recovering after plummeting after the surprise announcement of the election results last month. The euro is benefiting from renewed speculation about a U.S. interest rate cut.
Trading was slow the day after the US Fourth of July holiday, but activity is expected to pick up after the release of the US Non-Farm Payrolls report for June.
“Markets are in the midst of a strong summer holiday period with investors focused on inflation moving closer to target in major economies,” said Guy Miller, chief market strategist at Zurich Insurance Group.
“This, combined with weak US data, is positive for the inflation outlook and means rate cuts are back on the table,” he said.
The MSCI World Index hit a new record high and was hovering around that level, last up 0.08%, while European stocks rose 0.4% and Japan’s Nikkei and Topix also hit record highs.
Trading in U.S. stock futures signaled a slightly more positive start for Wall Street.
Following the UK election results, London’s FTSE 100 index rose 0.38% at the open. The yield on 10-year UK government bonds fell 4 basis points to 4.16%, roughly in line with other European markets. The pound edged up slightly to around $1.2784.
“A resounding victory brings much-needed clarity and stability to equity markets in an increasingly volatile world,” said Ben Ritchie, head of developed equities at Abledon.
Kevin Gardiner, international investment strategist at Rothschild & Co, said what is important will become clearer as it becomes clearer how Starmer plans to pay for the faster growth he wants.
“Even a centrist Labour government would not be as pro-business or libertarian as a Conservative government, and we can expect a number of changes to the details of tax and sector policy in the coming weeks, some of which will be controversial,” Mr Gardiner said.
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Nonfarm payrolls are estimated to have risen by 190,000 last month after adding 272,000 in May, according to a Reuters survey of economists. Payroll gains have averaged about 230,000 per month over the past 12 months.
Zurich’s Miller noted that recent jobs data has been weak and said a weaker-than-expected payrolls report would support a rate cut in September.
U.S. Treasury yields were little changed in early trading in London, with the two-year yield at around 4.69% and the benchmark 10-year yield rising slightly to 4.36%.
In currency markets, the euro rose to $1.0825 after a poll showed France’s far-right National Party falling short of a majority in Sunday’s parliamentary runoff election.
“If the polls ultimately prove accurate, it means more extreme policies such as fiscal expansion or immigration restrictions are unlikely to pass,” said Michael Wang, an analyst at MUFG.
The dollar weakened by about 0.4 yen to 160.72 yen. The Australian dollar hovered near a six-month high of 0.6735 as yield spreads swung in the Australian dollar’s favor on the view that persistent inflation may be the next to raise Australian interest rates. [AUD/]
Bitcoin is on track to suffer its first weekly drop in more than a year on concerns about a possible token dump from shuttered Japanese exchange Mt. Gox and further selling by leveraged players after the cryptocurrency’s strong rally.
That day, shares fell 8% to $53,523, their lowest price since late February.
Gold prices rose 0.3% to $2,363.80 an ounce, marking a second consecutive weekly increase, while crude oil prices are on track to rise for a fourth straight week.
Front-month Brent crude futures fell 12 cents to $87.33 a barrel, while U.S. West Texas Intermediate rose 4 cents to $83.92.
(Reporting by Dara Ranasinghe; Additional reporting by Wayne Cole in Sydney; Editing by Edwina Gibbs and Anil DeSilva)