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GLOBAL MARKETS-Wall St set to join global stocks party as investors dump bonds

Published 17/02/2021, 12:19 am
© Reuters.
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* German economic sentiment jumps

* Bitcoin breaks above $50,000

* Government bond yields leap

* U.S. stock futures hit record highs

* World FX rates http://tmsnrt.rs/2egbfVh

By Huw Jones

LONDON, Feb 16 (Reuters) - Wall Street was set to join a march propelling global shares to record highs on Tuesday, with investors dumping government bonds in a bet that COVID-19 vaccinations and U.S. stimulus will deliver a durable economic recovery after a year of lockdowns.

Bitcoin BTC=BTSP added to the bullish mood, climbing above $50,000 for the first time. MSCI's global stock index .MIWD00000PUS was up 0.18% at 686.30 points after hitting a record high of 686.41 points earlier in the session. A positive close would mark the 12th consecutive day of gains for the first time since January 2004.

U.S. stock futures hit record highs as investors piled into banks, energy companies other sectors that would benefit from an economic recovery. S&P500 futures ESC1 were up 0.5%.

Expectations of a strong economic recovery and looser fiscal and monetary policy in the United States pushed yields on safe haven U.S., German and UK government bonds higher, with gold XAU= also taking a knock.

The 10-year Treasury yields US10YT=RR topped 1.25% for the first time in 11 months.

"I think it's a global reflation trade very much in play, that risk-on positive investor sentiment is still very much with us," said Derek Halpenny, head of research for global markets at MUFG.

U.S. President Joe Biden is pushing ahead with his plan to pump an extra $1.9 trillion in stimulus into the economy.

"I think this most recent leg up is a reflection of the fiscal stimulus package in the U.S. is going to be larger, a supportive backdrop," Halpenny said.

EUROPEAN ECONOMY STIRS

The pan-European STOXX 600 .STOXX hit its highest since late February 2020, lifted by some good economic data.

The ZEW investor sentiment index in Germany, Europe's biggest economy, rose by far more than expected in February on expectations that people will flock back to shops and other retail outlets in the coming six months. zone gross domestic product fell less than initially estimated in the last quarter of 2020 and employment edged higher against the previous three months.

Prospects for a recovery lit up commodities, with the European mining index .SXPP hitting its highest level since July 2011.

"The big picture is that there is an awful lot of enthusiasm for recovery when it comes to the vaccine programme," said Michael Hewson, chief market analyst at CMC Markets.

Recovery hopes in Britain sent sterling GBP=D3 to 2-1/2 year highs, just short of $1.40 against the dollar.

The euro EUR=EBS crept 0.3% higher to $1.21590.

The U.S. dollar =USD index, at 90.242, was mired at a three-week low as growing optimism about recovery sent investors into riskier currencies, including the euro and British pound.

Market sentiment in Europe was helped by gains overnight in Asian shares, with Japan's Nikkei blue chip index .N225 up 1.28% at a 30-year high.

Ord Minnett adviser John Milroy said that while share markets were positive, investors were becoming wary of the future risk of inflation due to central bank and government stimulus programmes in place around the world.

"There is a clear sense with rates staying low for some time yet and investor appetite for equities staying strong we will likely see markets hold up for some time yet," Milroy told Reuters.

Investors are looking to the minutes from the U.S. Federal Reserve's January meeting, due to be published on Wednesday, for confirmation of its commitment to maintain its dovish policy stance over the near future. That in turn is set to keep a lid on bond yields.

Oil prices jumped to a 13-month high as a deep freeze due to a severe snow storm in the United States not only boosted power demand but also threatened oil production in Texas. O/R

Brent crude LCOc1 was trading at $63 a barrel, off 0.47%, after rising to its highest since January 2020 in the previous session. U.S. West Texas Intermediate (WTI) crude CLc1 futures gained 0.3%, to $59.65 a barrel.

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