© Reuters. FILE PHOTO: A passerby wearing a protective mask reflects on the screen displaying the exchange rate of the Japanese yen to the US dollar and stock prices at a brokerage house, amid the coronavirus outbreak (COVID -19), in Tokyo
By Tommy Wilkes
LONDON (Reuters) – European stocks soared on Monday as global markets started the week in a relatively optimistic mood following new signs last week that economies are recovering rapidly.
The start of the week was relatively calm, however, as investors refrained from taking significant positions ahead of a two-day Federal Reserve meeting starting Tuesday and quarterly gross domestic product figures for the United States.
But overall sentiment remained bullish, with Wall Street hitting another intraday high on Friday and European stocks near record highs early in the day on Monday.
The enlarged euro gained 0.23% while that of 0.22%. 100 climbed 0.21%.
Asian stocks also rebounded where the largest MSCI index of Asia-Pacific stocks outside of Japan hit its highest level since March 18, despite a late sell-off in Chinese stocks.
Wall Street futures indicated a slightly lower open.
The MSCI World Stock Index, which tracks stocks from 49 countries, rose 0.2%.
Stocks bask in massive rally – MSCI World Index has suffered just three months of decline in past 12 and is up nearly 5% this month and 9% for the year then that investors are betting on a rapid post-pandemic economic rebound, government and central bank stimulus.
Analysts, however, believe stocks look a bit overconfident and the rally will run into some hurdles after setting such a lightning pace and with such a recovery and budget madness already built in.
“The real crux of the matter, however, is what’s in the price. The rally since the start of the year has increasingly eliminated the hike over our targets,” noted Andrew Sheets, a strategist at Morgan stanley (NYSE :).
“Of four major global stock markets (US, Europe, Japan and emerging markets), only Japan is currently below our strategic forecast for end-2021.”
Yet recent data indicating a strong global economic recovery has only boosted confidence. Strong corporate earnings and the continued rollout of COVID-19 vaccinations in developed economies also supported sentiment.
Early April manufacturing activity indicators released last week pointed to a solid start to the second quarter, with data hitting record highs in the United States and signaling the end of the double-dip recession in Europe.
First-quarter U.S. gross domestic product data, due later in the week, should show activity is likely back to pre-pandemic levels, analysts said.
“We believe the economy will close the output gap and exceed potential in the second half of this year,” ANZ economists wrote in a morning note, suggesting more upside for equities.
“(Europe) cannot match this, but as 2021 progresses into 2022, the growth gap with the United States will narrow,” they added.
In bond markets, government debt yields rose as investors shed safer assets.
The rise of 1 basis point to 1.5773%, which is far from the levels of plus 1.7% reached earlier this month, when fears of a spike in inflation rocked the markets.
In foreign currencies, the dollar – which had benefited from higher Treasury bill yields – fell against a basket of currencies at its weakest since early March – another sign of the bullish mood of global investors this month .
edged down slightly, adding to a recent slide and approaching an all-time low as a chill set in on relations with the United States and after the new central bank chief signaled that the rate hikes would hurt the economy.
In commodities, it fell 57 cents to $ 61.57 a barrel and 57 cents to $ 65.64.
Gold climbed 0.1% to $ 1,779 an ounce.