Global stocks hit record highs, China pulls back after Party Day

TOKYO, July 2 (Reuters) – Global stocks held near their all-time high on Friday as investors looked at U.S. employment data for signs of balanced economic growth with a inflationary pressure moderate, while Chinese stocks fell a day after the Chinese Communist Party celebrated its centenary.

European stocks are expected to open moderately higher, with pan-European Euro Stoxx futures and UK FTSE futures trading up 0.4%.

The Japanese Nikkei (.N225) gained 0.2% and most other markets remained firm, but the largest MSCI Asia-Pacific equity index outside of Japan (.MIAPJ0000PUS) fell 0.8 %, due to the drop in Chinese and Hong Kong stocks.

The Shanghai Composite (.SSEC) fell 1.7%, on track to mark its biggest decline since March, as investors became cautious that, with the big celebration on the sidelines, monetary policy China could be tightened.

“It is difficult to expect relaxed monetary conditions as before,” said Masahiko Loo, portfolio manager at AllianceBernstein in Tokyo.

Loo also said that given the increasingly tense state of China-US relations, some foreign investors might have been upset by President Xi Jinping’s warning to foreign powers during his speech to mark the Party’s centenary. Communist.

Xi said any foreign force attempting to intimidate China “will have its head crushed.” Read more

“Foreign investors are probably becoming cautious after Chinese President Xi Jinping’s hawkish rhetoric,” Loo said.

The MSCI All Country World Index (.MIWD00000PUS) fell 0.1% but was held near an all-time high earlier this week.

On Wall Street, the S&P 500 hit its sixth consecutive all-time high on Thursday, as a new quarter began with bullish economic data.

Unemployment claims continued their downward trajectory, reaching their lowest level since the end of the pandemic. Read more

Monthly non-farm wage data, due later Friday, is expected to show an increase of 700,000 in June, and economists expect wages to grow around 0.4% in June.

While the prospect of a strong economic recovery underlies stock markets, investors remained concerned that a strong recovery from the pandemic could push inflation up to an uncomfortable level for the U.S. Federal Reserve.

“The situation remains uncertain and no one would now have a high degree of confidence in their forecasts. Markets will be very sensitive to any rise in inflation,” said Tomo Kinoshita, global markets strategist at Invesco.

In bond markets, the US 10-year yield stood at 1.466%, remaining well below 1.5% over the past two weeks, in part due to lower inflation expectations.

Shorter-term bonds could come under greater pressure if jobs data points to increasing inflationary pressures, leading investors to bet on rate hikes sooner, analysts said.

The yield on two-year bonds stood at 0.261%, not far from the 15-month peak of 0.284% set last month.

In the forex market, the dollar was perched at a 15-month high against the yen and multi-month highs against other majors on Friday, as traders bet strong U.S. labor data could increase even more.

The dollar hit 111.66 yen, hitting its highest level since March of last year.

The euro slipped to a three-month low of $ 1.1837 overnight and settled at $ 1.1847 for the last time.

The Australian dollar fell to $ 0.7461, after slipping to its lowest level since December on Thursday.

Oil prices were near their highest levels since 2018 on indications that OPEC + producers may increase production more slowly than expected in the coming months.

OPEC + postponed its ministerial meeting until Friday to hold more discussions on oil production policy, OPEC + sources said on Thursday, after the UAE blocked a plan to immediately ease the cuts and their extension until the end of 2022. read more

U.S. crude futures were trading at $ 75.28 a barrel, almost flat the day after hitting $ 76.22 on Thursday, its highest level since October 2018.

Editing by Simon Cameron-Moore

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