Global equities post their best day in 5 months; oil, government bond yields rise

Stocks surged globally on Friday at their best in five months as strong U.S. corporate performance fueled optimism about the economy, although oil prices at three-year highs kept risks down. inflation and increased government bond yields.

U.S. investment bank Goldman Sachs Group was the latest on Wall Street to beat market expectations when it announced a 66% increase in third-quarter profits, thanks to a record wave of banking activity from investment.

Rising prices in the United States and Europe

While some analysts have warned investors against complacency so early in the earnings season, especially given current supply chain constraints, US stocks joined Friday’s rally in global stocks.

The Dow Jones Industrial Average jumped 1.1% in its best weekly performance since June 25. The S&P 500 climbed 0.75% to mark its best week in 2.5 months, and the Nasdaq Composite added 0.5%.

The pan-European STOXX 600 index rose 0.74% and the gauge of MSCI stocks around the world gained 0.86%, the biggest daily gain since May 14.

“We have clearly started the third quarter earnings season, but we have miles to go before we sleep,” said Arthur Hogan, chief market strategist at National Securities Corp. Hogan noted that only 35 of the S&P 500 companies reported earnings.

Unperturbed by news of a fatal stabbing against a UK lawmaker on Friday, the UK FTSE 100 climbed 0.37% to a nearly 20-month high. The UK blue chip index has now recovered all the ground lost since the start of the coronavirus pandemic in March of last year.

Fears that soaring oil prices may weigh on businesses and the economy have also faded for the time being.

Oil prices rise

Forecasts of an oil supply shortfall in the coming months, as demand increases due to relaxed travel restrictions, have pushed oil prices to a three-year high, above $ 85 a barrel .

US crude recently jumped 1.13% to $ 82.23 a barrel and Brent added 0.83% to $ 84.70, after hitting a high of $ 85.10.

Bets that higher prices would likely prompt central banks to raise interest rates earlier than expected pushed up government bond yields, even though the gains were more pronounced in the United States than ‘in Europe.

The yield on two-year US Treasuries, which reflects short-term rate expectations, climbed to a nearly 19-month high of 0.3949%, from 0.354% on Thursday. The benchmark 10-year Treasury yield also rose to 1.5738%, from 1.519% on Thursday.

In Europe, 10-year Bund yields fell after posting seven straight weeks of gains on signs of mounting inflationary pressures and robust economic growth.

World currencies

The dollar, supported by bets that accelerating inflation could prompt the Federal Reserve to raise interest rates earlier than expected, hit a three-year high against the yen, which is generally sensitive to spreads rate. One dollar bought up to 114.46 yen, the highest since October 2018.

The dollar index, which measures the greenback against a basket of other currencies, however, was down that day, slipping 0.104%, and poised for its first weekly decline against its major peers since the start of last month, after losing some ground on the British Pound and the Euro.

Gold prices took a break on Friday after experiencing their best day in seven months the previous day. Spot gold fell 1.6 percent to $ 1,766.82 an ounce, and US gold futures fell 1.67 percent to $ 1,766.70 an ounce .

China is growing slowly

Returning optimism will be tested by weaker growth data expected from China next week and the impact of strengthening oil prices on consumers as the winter months approach, said Mike Hewson, chief market analyst at CMC Markets.

Indeed, China’s energy crisis worsened on Friday with coal prices reaching an all-time high.

A Chinese central bank official said on Friday that the ripple effect of the China Evergrande Group’s debt problems on the banking system is controllable, in rare official remarks on the second-largest Chinese developer’s liquidity crunch that has shocked the steps.

Asian markets

The MSCI’s largest Asia-Pacific stock index outside of Japan gained 1.35%, up 2.1% for the week in its best weekly performance since late June, while Japan’s Nikkei jumped 1.81%, led by tech stocks.

Chinese stocks rose more cautiously than elsewhere, with blue chips rising 0.38% ahead of next week’s growth figures.

Analysts largely attributed the gains in Asia to the US rally.

European car registrations fell by more than a quarter in September, and Toyota Motor said it would cut global production in November as chip shortages and supply chain issues continued to weigh on the industry. .

Bitcoin hit a six-month high at $ 61,895.05 on Friday, approaching the April record, as traders grew increasingly confident that U.S. regulators would approve the launch of an exchange-traded fund on the basis of its futures contracts.

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