World stock index sets fresh record high

Reuters London | Updated on January 09, 2018 Published on November 29, 2017

FTSE lags but rest of European stocks gain; Bitcoin tops $10,000 barrier on more exchanges

Signs of progress with US tax cuts and Europe's Brexit negotiations brought fresh highs for world stocks on Wednesday, while bitcoin topped $10,000 in a frenzy for cryptocurrencies.

Britain's pound was also in focus, topping $1.34 for the first time since October on reports that Britain has offered as much as 50 billion euros - most of what the European Union wants - to settle a Brexit “divorce bill".

Sterling's strength did push London's FTSE into the red, but elsewhere the mood was almost exclusively upbeat, particularly in bank stocks after the soon-to-be head of the Federal Reserve said some regulations could be scaled back.

MSCI index

Germany's DAX, France's CAC, Milan and Madrid were all up between 0.5 and 0.7 per cent and MSCIs all-country world index was at yet another record peak after all four major Wall Street indexes notched up new highs on Tuesday.

“It seems to me markets are still trading on the theory that the glass is half full,” said fund manager Hermes' chief economist Neil Williams.

Asian share markets were not quite as jubilant, checked by caution over the latest missile test by North Korea and concerns at recent softness in Chinese shares.

MSCI's broadest index of Asia-Pacific shares outside Japan barely budged from where it started the day, while China's blue chip index ended flat having slipped as much as 1 per cent at one point. Among the better performers, Japan's Nikkei added 0.5 per cent, while Australia's main index rose 0.45 per cent.

US tax cut plan

The prospects for a US tax cut seemed to improve after Senate Republicans rammed forward their Bill in a partisan committee vote that set up a full vote by the Senate as soon as Thursday, although details of the measure remained unsettled.

But Republican leaders conceded that they have yet to round up the votes needed for passage in the Senate, where they hold a narrow 52-48 majority. Some analysts, however, did warn of the risks of unintended consequences if the package was passed.

“Tax cuts will mainly boost the demand side of the economy at a time when the economy has little spare capacity,” said Jeremy Lawson, chief economist at Standard Life Investments.

“For that reason, the package will primarily bring forward activity with most of the stimulus eventually offset by the Federal Reserve lifting interest rates more quickly.”

Fed chair nominee Jerome Powell, had in his Senate confirmation hearing on Tuesday, said the case for a December rate hike was coming together.

Bubbly bitcoin

Powell also hinted at a lighter touch for bank regulation, saying current rules were already tough enough.

The S&P financial sector soared 2.6 per cent in reaction, its biggest daily gain since March 1. That helped the Dow climb 1.09 per cent, while the S&P 500 rose 0.99 per cent and the Nasdaq added 0.49 per cent.

Futures prices pointed to a consolidation of those gains when New York reopens later.

US consumer confidence

Adding to the bullish mood was data showing US consumer confidence surged to a near 17-year high in November, while home prices rose sharply in September, which should underpin consumer spending.

Euro zone government bond yields edged higher meanwhile as the first instalments of German state inflation data pointed to another uptick for Europe's largest economy, which should bolster the ECB's move to wind down its stimulus.

“In recent months we have seen core inflation dropping, and that has been identified by the ECB as a key measure,” said ING strategist Martin van Vliet.

It all helped the euro reassert its recent dominance over the dollar. The euro climbed up to $1.1870 and against a basket of currencies the dollar was down 0.2 per cent at 93.075 and not far off a two-month trough touched on Monday.

The dollar was steadier against the yen at 111.54 yen and away from a 10-week low of 110.85, while the pounds jump on a trade-weighted basis was 1.4 percent, its best since April.

That paled in comparison to bitcoin which flew to $10,200 on BitStamp, a major trading platform based in Luxembourg. The latest surge brought its gains for the year so far to over 950 per cent, leaving more than a few observers baffled.

“The market is very illogical. There's no way to rationally value bitcoin as an asset,” said Thomas Glucksmann, head of marketing at Hong Kong exchange Gatecoin.

“There's nothing that makes sense because there's no fundamentals behind bitcoin. What people are buying into is the idea of how this technology can be used in the future.”

In old-fashioned commodity markets, gold looked rather dull at $1,295.00 an ounce. Oil eased amid uncertainty over the outcome of OPEC talks and a surprise rise in crude inventories. US crude dipped 32 cents to $57.67, while Brent crude oil lost 43 cents to $63.18 a barrel.

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Published on November 29, 2017
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