Global stocks hit an all-time high as investors held positions that predicted a strong economic recovery from the coronavirus, but maintained a cautious stance ahead of the next monthly US central bank meeting.
The FTSE All World Index rose 0.1% from its last record. The gauge of developed and emerging market equities rose 1.1% this month after outsized gains earlier in the year.
The European Stoxx 600 stock index rose 0.3% to a record high, although it has also only risen 0.3% so far in June.
“The economic data all continue to improve, but everyone was expecting it,” said Caroline Simmons, UK investment director for UBS Wealth Management. “People are now waiting to see what happens with central banks,” she added.
The U.S. Federal Reserve, the world’s most influential rate regulator, is holding its monthly meeting next week, which will be closely watched after some of its policymakers called for talks to cut its $ 120 billion monthly bond purchases that have boosted financial markets since last March. .
The Conference Board predicts that US economic output will grow at an annualized rate of 9 percent in the second quarter of this year. The European Central Bank also raised its forecast for economic growth in the eurozone on Thursday, while data on Friday showed Britain’s GDP jumped a record 27.6% in April from the same month in April. last year.
Investors are evaluating this progress, which increases the likelihood of strong corporate earnings, and how it might influence the future direction of central bank policy.
“The Fed is likely to start talking about reducing asset purchases more openly over the next two months, with a view to making some reduction next year,” Simmons said.
Government bonds continued their rally that started earlier in the week on Friday, despite growing concerns about the decline and high inflation figures in the United States. The yield on 10-year US Treasury bonds, a benchmark for global debt markets, fell 0.02 percentage points to 1.443 percent, near its lowest since early March. The equivalent yield on the German Bund fell from 0.03% to minus 0.285%.
The U.S. Department of Labor said on Thursday that headline consumer price inflation accelerated by 5% in the 12 months leading up to May, the largest year-on-year jump since 2008.
Investors were “clearly happy to dismiss the result as being mainly due to the price normalization linked to the pandemic,” commented Daiwa economist Chris Scicluna, “rather than a sign of stronger than expected demand pressures which could disrupt the outlook for the Fed’s accommodative policy.
In a research note, however, the investment committee of Swiss bank Credit Suisse warned of a “high level of investor complacency” about inflation.
“If another set of high inflation indicators causes central banks, primarily the US Federal Reserve, to be less patient in maintaining accommodative monetary conditions, markets could be caught off guard,” said Swiss credit.
In foreign currencies, the euro held up against the dollar to buy $ 1.2167. The British pound fell 0.1% to $ 1.4153. The dollar index, which measures the US currency against those of major trading partners, has remained stable after trading in a narrow range for most of this month, with traders awaiting further indices from the Fed. .
Brent crude, the international benchmark for oil, gained 0.2% to $ 72.68 per barrel.