World Stocks Hit New All Time High; Hong Kong Up For Record 14 Straight Days

World stocks hit a new all time high on Friday with U.S. equity futures rising for the 8th trading day out of 9 in 2018 - the Dow is just a little over 300 points away from 26,000 - alongside Asian shares while European stocks and oil are little changed. The euro surged to a three-year high as Germany was said to reach a "grand coalition" agreement, heaping more pressure on the dollar before inflation data.

European stocks advanced with U.S. equity futures as BlackRock Inc. kicked off a busy earnings season with profits that beat estimates.

MSCI’world stock index hit yet another record high and was on track to rise for its eighth of the nine business days so far this year -- for a total increase of 3.5%. "This bull market is highly related to the fact we are facing good growth, low inflation and soft monetary policy normalization. If any of those were to be shaken that would be a big problem,” said Jeanne Asseraf Bitton, head of cross-asset research at Lyxor Asset Management.

The euro is set for its strongest close since December 2014, leading most G10 currencies higher against the dollar. The Stoxx Europe 600 Index climbed for the first day in three. Hong Kong’s equity index extended a record winning streak as data showed Chinese exports rose in December. Oil fell after a four-day rally, even as most commodities climbed, with gold heading for its highest close since September.

Reports that German policymakers are set to resolve a months-long political stalemate added to news yesterday that the European Central Bank is open to tweaking its policy guidance soon to align it with a strengthening economy. The euro’s overnight index swap rates have risen sharply this week as traders priced in a higher chance of a rate hike early next year.

In response to the EUR strength, German 10-year bond yield hit a fresh five-month high of 0.539 percent after Chancellor Angela Merkel’s conservatives and the Social Democrats agreed a blueprint for formal coalition negotiations.

European stocks took their cue from a recovery in Asian trading, but were set to end the week on a dud note as a surging euro weighed on European exporters and kept gains on Germany’s DAX muted despite the breakthrough in coalition talks. As a result, the MSCI index of European stocks index eked out a 0.1% gain. While the Euro's rise has reflected growing optimism over the bloc’s economic recovery, some have flagged it as a potential brake on stocks. Monica Defend, head of strategy at Amundi Asset Management, said the currency, for which she has a target of $1.22, was the biggest risk to European equities.

Rising European bond yields were also driven higher by minutes on Thursday of the ECB’s December meeting that showed it thinks it should revisit its communication stance in early 2018. Lyxor’s Bitton said Bund yields were already near to hitting her target for the first quarter. “Markets were a bit too complacent about bonds so they took some excuses to correct,” she told Reuters. “We were a little surprised that the market reacted so strongly to the ECB.” The minutes showed that with the euro zone seeing its best growth in a decade, ECB policymakers were considering a gradual shift in its stance to reduce the focus on bond purchases and raise the emphasis on interest rates.

Overnight a blowout china trade surplus, helped by booming global trade, helped Chinese exports to surge last year while import growth slowed to 4.5%.

Chinese Trade Balance (CNY)(Dec) 362.0B vs. Exp. 235.2B (Prev. 263.6B).

Chinese Exports (CNY)(Dec) Y/Y 7.4% vs. Exp. 6.7% (Prev. 10.3%)

Chinese Imports (CNY)(Dec) Y/Y 0.9% vs. Exp. 11.8% (Prev. 15.6%)

Chinese Trade Balance (USD)(Dec) 54.69B vs. Exp. 37.00B (Prev. 40.21B).

Chinese Exports (USD)(Dec) Y/Y 10.9% vs. Exp. 10.8% (Prev. 12.3%)

Chinese Imports (USD)(Dec) Y/Y 4.5% vs. Exp. 15.1% (Prev. 17.7%)

 

 

China Customs said China trade outlook is upbeat for this year, but added it will be difficult for Chinese trade to maintain double digit growth.

The strong trade data, helped the onshore yuan strengthen as much as 0.42% to the highest intraday level since Sept. 8 at 6.4702 per U.S. dollar. The CNY rose 0.41% to 6.4714 as of 3:31pm in Shanghai; CNH reverses earlier loss to advance 0.18% to 6.4790 in Hong Kong.

Hong Kong investors were unfazed by signals local equities may be overbought as the benchmark gauge rose for a record 14th day. Tencent Holdings Ltd. and energy explorers led the advance on Friday. The Hang Seng Index closes 0.9% higher; gauge has added more than 7% since Dec. 20. The 14-day relative strength index has risen to 80, the highest since February last year and above the 70 level that signals to some traders an asset is overbought.

In geopolitics, South Korea and US are in discussions to develop ties with North Korea, according to Yonhap citing an envoy. US Treasury Secretary Mnuchin confirms US plans to reimpose sanctions on Iran, while a separate report states the White House plans to announce decision on Friday. North Korea's propaganda outlet called for the total suspension of joint military drills between South Korea and the United States on Friday, according to Yonhap.

Elsewhere, an exchange-traded fund tracking Brazilian equities dropped in after-hours U.S. trading after S&P Global Ratings cut Brazil’s sovereign credit rating deeper into junk territory. Bitcoin steadied after four days of losses amid increasing scrutiny from regulators around the world.

The end of a turbulent ...
2 Published By - Zero Hedge - 2018.01.12. 12:49
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