World stocks near record highs as China, U.S. data back global recovery hopes

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TOKYO — Global stocks stood near record highs on Friday after strong U.S. and Chinese economic data cemented expectations of a solid global recovery from the coronavirus-induced slump.

European shares are expected to inch higher, with Euro Stoxx futures up 0.1% and Britain’s FTSE futures slightly higher.

MSCI’s broadest index of Asia-Pacific shares outside Japan was last up 0.25%, with Shanghai shares adding 0.6%. Japan’s Nikkei ticked up 0.1%.

MSCI’s broadest gauge of world stocks ticked up 0.05% by late Asian trade, staying just below Thursday’s record peak.

“Markets look ahead to economic normalization as vaccines will go around. Stock prices are likely to rise gradually while looking at upcoming earnings,” said Tomo Kinoshita, global market strategist at Invesco Asset Management in Tokyo.

Markets in Asia were largely steady after China reported record 18.3% growth in the first quarter, though the reading slightly undershot expectations, while retail sales bounced strongly last month.

The data did little to change the view that its brisk expansion is expected to moderate later this year as the government turns its attention to reining in financial risks in overheating parts of the economy.

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“Regulators might make further efforts to cool down the property market and control domestic leverage. Fiscal discipline might also be strengthened, leading to deceleration in local government financing and infrastructure investment,” said Chaoping Zhu, global market strategist at J.P. Morgan Asset Management in Shanghai.

Data from the U.S. overnight was also upbeat, with retail sales rebounding 9.8% in March, pushing the level of sales 17.1% above its pre-pandemic level to a record high.

The brightening economic prospects were underscored by other data, including first-time claims for unemployment benefits tumbling last week to the lowest level since March 2020.

“The U.S. recovery looks really strong. And now that restaurants and hotels, both of which are labor intensive, are reopening, we could see sharp gains in payrolls in coming month,” said Koichi Fujishiro, senior economist at Dai-ichi Life Research.

Despite strong data, U.S. bond yields dropped, in part driven by Japanese buying, as they have began a new financial year this month.

The 10-year U.S. Treasuries yield dropped to 1.529%, a five-week low, on Thursday and last stood at 1.578% , off its 14-month high of 1.776% set at the end of March.

“The market has already fully priced in an U.S. economic recovery in the near term. And if the Federal Reserve will keep interest rates on hold for the next two to three years, no doubt the carry of U.S. bonds would be very attractive compared with Japanese or euro zone bonds,” said Chotaro Morita, chief fixed income strategist at SMBC Nikko Securities.

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The fall in long-term bond yields benefited stocks, and particularly tech shares, given the idea that their historically expensive valuations can be justified because investors would have no choice but to buy shares to make up for low returns from bonds.

On Wall Street, the S&P 500 advanced 1.11% while the tech-heavy Nasdaq Composite added 1.31%, nearing its record peak set in February.

In the currency market, lower U.S. yields were a drag on the U.S. dollar.

The euro stood at $1.1951, having hit a six-week high of $1.19935 overnight while the U.S. currency slipped to a three-week low of 108.61 yen and last traded at 108.89.

Gold also hit a seven-week high of $1,769 per ounce and last stood at $1,765.50.

Oil prices hit one-month highs on higher demand forecasts from the International Energy Agency (IEA) and OPEC, in addition to positive U.S. and Chinese data.

Brent futures gained 0.6% at $67.37 per barrel, while U.S. crude rose 0.55% to 63.81 per barrel, both on course for their first substantial weekly gains in six.

(Editing by Gerry Doyle, Shri Navaratnam and Kim Coghill)