World stock markets hover near record highs on hopes of recovery

World shares hovered within a whisker of record highs on Wednesday, on track for a 12% gain for the half-year following strong U.S. consumer confidence data, though inflation and pandemic-related worries cooled European stocks.

Trillions of dollars of monetary and fiscal stimulus by central banks and governments around the world in response to COVID-19 have buoyed asset markets in the past year, while vaccination roll-outs in recent months are boosting the economic outlook.

U.S. consumer confidence jumped to its highest level in nearly 1-1/2 years in June, with growing labour market optimism as the economy reopens offsetting concerns about higher inflation.

 

Separately, the Federal Housing Finance Agency house price index shot up a record 15.7% in April from a year ago.

"The search for yield is a very powerful force. It doesn't have the narrative right now to stop it," said Sebastien Galy, senior macro strategist at Nordea Asset Management.

MSCI's global share index was flat but set for a fifth straight month of gains, a day after hitting an all-time high.

S&P futures rose 0.09% after the Dow Jones Industrial Average and S&P 500 inched up 0.03% and 0.02% overnight, and the Nasdaq Composite added 0.19%, hitting a record high close.

Moderna Inc jumped 6.0% to a record high after the drugmaker's COVID-19 vaccine showed promise in a lab study against the Delta mutation first identified in India, with a modest decrease in response compared with the original variant.

European shares edged down 0.1%.

The European benchmark, which hit record highs this month, is on course to post its biggest first-half percentage gains since 1998, but high inflation as well as the spread of the highly contagious Delta variant have recently slowed gains.

German stocks were down 0.16% and UK shares were off 0.13%.

Indonesia, Malaysia, Thailand and Australia are all battling pandemic outbreaks and tightening restrictions, and Spain and Portugal announced restrictions for unvaccinated British tourists.

EYES ON PAYROLLS

Steven Daghlian, market analyst at CommSec in Sydney, said that following the global run-up in equities, markets were on edge ahead of Friday's release of U.S. non-farm payrolls data that could influence Federal Reserve policy.

Economists polled by Reuters are expecting a gain of 690,000 jobs for June, up from 559,000 in May. But the variation among the 63 estimates is large, ranging from 400,000 to more than a million.

The dollar was headed for its best monthly rise since March, mostly in the wake of a surprisingly hawkish shift in the Fed's rates outlook.

A "very optimistic" Fed Governor Christopher Waller on Tuesday said it may need to start dialling down its massive asset purchase programme as soon as this year to allow the option of raising interest rates by late 2022.

The dollar index was steady at 91.858, with the yen up 0.01% to 110.51 and the euro up 0.05% at $1.19.

Sterling was trading at $1.3833, down 0.03%.

The benchmark 10-year U.S. Treasury note yielded 1.4781%, down slightly from 1.48% late on Tuesday.

Germany's 10-year government bond yield, the benchmark of the euro area, fell 0.5 basis points to -0.18%.

MSCI's index tracking Asian shares outside Japan was set for a small monthly loss, but still on course for a fifth straight quarterly rise, its longest such streak since 2006-2007. The Asian index was up 0.08%.

Chinese blue chips added 0.65%, Australian shares were up 0.16% and set for a ninth straight month of gains, and Seoul's Kospi rose 0.3%. Japan's Nikkei was down 0.07%.

Brent crude oil futures were unchanged at $74.76 per barrel and U.S. crude gained 0.26% to $73.17, after an industry report showed U.S. stockpiles fell last week. [O/R]

Spot gold lost 0.43% to $1,754.19 an ounce, putting it on course for its biggest monthly drop since November 2016. [GOL/]

 

(Additional reporting by Andrew Galbraith in Shanghai and Elizabeth Dilts Marshall in New York; Editing by Kenneth Maxwell and John Stonestreet)