LONDON: Global shares edged lower yesterday but remained on course for their sixth straight month of gains as solid corporate earnings and central bank largesse kept sentiment intact, while the dollar held near a one-month low.
MSCI’s World index was last down 0.3 per cent, leaving it broadly flat on the week, but up 1.1pc for the month, just shy of a record high.
Markets remain in a tussle, though, as a Chinese crackdown on its technology sector and rising cases of the Delta coronavirus variant range against still-Dovish monetary policy and punchy earnings from a range of companies.
In Europe, UniCredit, BNP Paribas and Eni saw profits rise on Friday. But underwhelming numbers overnight from Amazon – as some developed market economies begin to reopen after lockdown – proved it was not all one-way traffic.
“We have a bit of day-to-day volatility, but the overall market is quite strong,” said Hans Stoter, global head of core investments at AXA Investment Managers.
“It’s largely still a function of limited alternatives available, with a still attractive pick up in return versus the more risk-free alternatives.”
Bank of America analysts, however, said they had turned “neutral” on European equities after a 60pc rally year-to-date, saying they expected the STOXX Europe 600 to remain close to current levels of 460 until early in the fourth quarter.
Across Europe, the STOXX Europe 600 pulled back from its lows to trade down 0.6pc, tracking overnight weakness in Asia where the MSCI Asia ex-Japan index was down 1.1pc.
US stock futures pointed to a lower open on Wall Street, down 0.6pc to 1.1pc, after robust earnings and solid second-quarter US growth numbers had helped blue-chips in the world’s biggest economy hit a record high.
The US economy grew past pre-pandemic levels in the second quarter, helped by rising Covid-19 vaccinations and government aid, though the expansion fell short of expectations and growing coronavirus infections are clouding the outlook for the current quarter.
After rising on Thursday on the economic data, US Treasury yields pulled back, particularly towards the long end of the yield curve.
Benchmark 10-year notes last yielded 1.2473pc, down from 1.269pc late on Thursday, and the 30-year yield stood at 1.9013pc, down from 1.916pc on Thursday.
The spread between the US 10-year and 2-year yield narrowed to 105 basis points.
But following Fed Chairman Jerome Powell’s remarks this week that rate increases are “a ways away” and the job market still had “some ground to cover”, the dollar wallowed near one-month lows yesterday and was set for its worst week since May.
The dollar index was last flat at 91.845, with the euro up 0.1pc at $1.1897. The greenback was 0.1pc higher against the yen at 109.57..
“We expect the Fed to remain flexible, edging toward tightening only when justified by consistently strong economic data. Powell was a Fed board member in 2013 when taper talk unsettled markets, so he looks set to remain cautious in his communications,” said Mark Haefele, Chief Investment Officer, USGlobal Wealth Management.
In European debt markets, German government bond yields were set for their biggest monthly fall since January 2020, as investors watched inflation data in the bloc, although they remained steady on the day.
In commodities markets, oil prices fell back after global benchmark Brent on Thursday topped $76 a barrel on tight US supplies.
Brent was down 0.22pc at $75.88 per barrel and US West Texas Intermediate crude traded down 0.43pc at $73.30. Brent crude is still up nearly 2pc for the week.
Spot gold was flat at $1,827.5 an ounce, on course for its best week in more than two months on the prospect of delayed Fed tapering.