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World stocks notch best day in 5 months; oil, govt bond yields up

Stock MarketsOct 15, 2021 05:07PM ET
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2/2 © Reuters. FILE PHOTO: A man wearing a facial mask, following the coronavirus disease (COVID-19) outbreak, stands in front of an electric board showing Nikkei (top in C) and other countries stock index outside a brokerage at a business district in Tokyo, Japan, Janu 2/2

By Koh Gui Qing

NEW YORK (Reuters) - Stocks surged globally on Friday in their best day in five months as strong U.S. corporate earnings reports fueled optimism about the economy, though three-year-high oil prices kept inflation risks alive and lifted government bond yields.

U.S. investment bank Goldman Sachs Group Inc (NYSE:GS) was the latest on Wall Street to trounce market expectations when it reported a 66% surge in third-quarter profit, thanks to a record wave of investment banking activity.

Though some analysts warned investors against complacency so early in the earnings season, especially given current constraints in the supply chain, U.S. stocks joined Friday's rally in global equities.

The Dow Jones Industrial Average jumped 1.1% in its best weekly performance since June 25. The S&P 500 climbed 0.75% to notch its best week in 2-1/2 months, and the Nasdaq Composite added 0.5%.

The pan-European STOXX 600 index rose 0.74% and MSCI's gauge of stocks across the globe gained 0.86%, the biggest daily rise since May 14.

"We are clearly off to a good start of the third-quarter earnings season, but have miles to go before we sleep," said Arthur Hogan, chief market strategist at National Securities Corp. Hogan noted that only 35 of the S&P 500 companies have reported their earnings.

Unperturbed by news of a fatal stabbing of a British lawmaker on Friday, Britain's FTSE 100 climbed 0.37% to hit a near 20-month high. The UK blue-chip index has now recovered all ground lost since the coronavirus pandemic began in March last year.

Concerns that soaring oil prices could drag on businesses and the economy also took a backseat for now.

Forecasts of an oil supply deficit over the next few months as demand rises on the back of relaxed travel restrictions drove oil prices to a three-year high of above $85 a barrel.

U.S. crude recently jumped 1.13% to $82.23 per barrel and Brent added 0.83% to $84.70, after hitting a high of $85.10.

Bets that rising prices are likely to prompt central banks to raise interest rates sooner than expected lifted government bond yields, though gains were more pronounced in the United States than in Europe.

The yield on two-year U.S. Treasuries, which reflect short-term rate expectations, zoomed up to a near 19-month-high 0.3949%, from Thursday's 0.354%. Benchmark 10-year Treasury yield also rose to 1.5738%, from Thursday's 1.519%.

In Europe, 10-year Bund yields slipped after registering seven straight weeks of gains on signs of rising inflationary pressure and robust economic growth.

The dollar, bolstered by bets that quickening inflation could prompt the Federal Reserve to raise interest rates sooner than expected, touched a three-year high against the yen, which is usually sensitive to rate differentials. One dollar bought as much as 114.46 yen, the most since October 2018.

The dollar index, which measures the greenback against a basket of other currencies, was lower on the day, however, slipping 0.104%, and set for its first weekly decline versus major peers since the start of last month, having lost a little ground to sterling and the euro.

Gold prices took a breather on Friday after having their best day in seven months the previous day. Spot gold dropped 1.6% to $1,766.82 an ounce, and U.S. gold futures fell 1.67% to $1,766.70 an ounce.

The return of optimism will be tested by next week's anticipated weaker growth data from China, and the impact of strengthening oil prices on consumers going into the winter months, said Mike Hewson, chief markets analyst at CMC Markets.

Indeed, China's energy crisis deepened on Friday with coal prices hitting a record high.

European car registrations slumped by more than a quarter in September, and Toyota Motor (NYSE:TM) Corp said it would cut global output in November as chip shortages and supply chain problems continued to dog the sector.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 1.35%, rising 2.1% for the week in its best weekly performance since late June, while Japan's Nikkei surged 1.81%, led by tech stocks.

Analysts largely attributed the gains in Asia to the U.S. rally.

Chinese shares rose more cautiously than elsewhere with blue chips up 0.38% ahead of next week's growth figures.

A Chinese central bank official said on Friday that the spillover effect of China Evergrande Group's debt problems on the banking system is controllable, in rare official remarks on the liquidity crisis at China's No. 2 developer that has roiled markets.

Bitcoin hit a six-month high of $61,895.05 on Friday, approaching the record hit in April, as traders became increasingly confident U.S. regulators would approve the launch of an exchange-traded fund based on its futures contracts.

Bitcoin on the rise https://fingfx.thomsonreuters.com/gfx/mkt/movanjqkapa/bitcoin.PNG

World stocks notch best day in 5 months; oil, govt bond yields up
 

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Comments (7)
Jack Santini
Jack Santini Oct 15, 2021 3:35AM ET
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China is not an outcast. They pursue a responsible and long-term economic policy. Effects will be in the future.
Fong SH
Fong SH Oct 15, 2021 3:32AM ET
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Nobody is genius at all, all of us learn from scratch and advance eventually. I've been investing for the last 34 years, have never seen a financial struggle like this one, it's a power struggle out there. Even China's own local companies were in a shock to see all these changes lately, as they have been too relax, & now they caught offguard. It's a different gameplay now, as most think in the beginning, anything that comes out from China, means "COPY". Well, that's in the past, not now. It's baby steps for China, but it moving in the right pace. China is not here to create a takeover of whatever the rest of the world can do, but wants to be in the game. So, don't treat it as a Threat. Just my thoughts.
Fong SH
Fong SH Oct 15, 2021 3:24AM ET
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Well, for now, most wouldn't believed that China has the abilities & power to do all these  in one stage, wrong, China has been quietly watching & learning how the world financials rules & implementations, she learnt, she study & changed accordingly. And the world doesn't like it, especially foreign funds, & even HongKong local funds &  investors. Give it another 3 to 5 years, Asian economies will have to learn how to embrace China financial rulings as the money is there. Local large companies in China will have to embrace her eventually as China's financial markets, technologies & systems advance in the coming years, China may not match the standards of world's technologies but at least she's putting in new ones.
mad god
mad god Oct 15, 2021 3:24AM ET
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i been telling u all. china is winning now although the surface looks different
Fong SH
Fong SH Oct 15, 2021 3:19AM ET
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A lot of analysts & so call stocks gurus are betting a setback for China's economy & Hang Seng dued for a correction. Well, like the saying goes, the winner takes it all. 1. China have been selling USD Bonds quietly for some time, strengthening the Chinese RMB against the USD.  2. China's Financial Regulators also started to tighten regulations to tell the public listed companies who is the boss, & doing a cleaning up of backdoor listings, rules tightenings and so forth. 3. For public companies who are seeking backdoor listings elsewhere, well, show me your books first before you take your leap. 4. Owners of these public listed companies, Regulators need to know who are the people sitting on the board, what kind of powers & duties are they involved? And the list goes on.
Darrell Peterson
Darrell Peterson Oct 15, 2021 12:49AM ET
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Ghina , playing the long game .
perplexed76 .
perplexed76 . Oct 14, 2021 11:26PM ET
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China doesn't participate in this festival of joy. They are sitting in the dark. Outcast!
 
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