World stocks head for record high on recovery, vaccine hopes

© Reuters. Passersby wearing protective face masks walk past a screen displaying Nikkei share average and world stock indexes, amid the coronavirus disease (COVID-19) outbreak, in Tokyo

By Simon Jessop

LONDON (Reuters) - Global stocks eyed a fresh record high on Monday as signs of economic recovery in Asia, strong corporate earnings and additional positive data about a COVID-19 vaccine boosted investor sentiment.

U.S. stock futures pointed to a stronger open on Wall Street, up 1.2%, extending gains after pharma company Moderna (NASDAQ:MRNA) said its prospective vaccine was 94.5% effective in preventing the illness which has ravaged economies across the globe.

That news helped the MSCI World Index of global shares to extend gains, rising by 0.6% to just shy of a record high hit briefly this month, building on strong overnight gains in Asia's leading markets and a stronger open for most European bourses.

MSCI's broadest index of Asia-Pacific shares outside Japan had hit its highest level since launching in 1987 as Japan pulled out of recession, China posted better-than-expected industrial output data and the region signed the largest ever trade deal.

Taking their lead, European indices also set daily highs after the Moderna news, with Britain's FTSE 100 (FTSE) up 1.7% and the pan-Europe STOXX Europe 600 (STOXX) up 1.4%.

"The markets get the new trading week off to a solid start, which is encouraging given all the excitement generated in the last seven days by news of vaccine breakthroughs," said AJ Bell investment director Russ Mould.

"Solid and steady gains are arguably just what investors need after a very volatile period."

The announcement by Moderna followed similarly positive news a week ago from rival Pfizer (N:PFE).

The prospect of an end to economy-sapping COVID lockdowns also helped oil prices strengthen, with Brent and West Texas Intermediate crude prices up around 3%, while gold turned negative to trade down 0.7%.

European government bond yields rose on the Moderna news, with Germany's benchmark 10-year yields up 2 basis points on the day, while the gap between Italy and Germany's yields fell to the lowest since the second quarter of 2018.

After languishing for much of the day, the dollar perked up to trade marginally stronger against a basket of currencies, albeit kept in check by fresh data over the weekend showing a rise in the number of COVID-19 cases.

Looking ahead, a slew of U.S. Federal Reserve speakers are set to comment this week, beginning with Vice Chair Richard Clarida at 1900 GMT.

While rising cases of the coronavirus were a risk, Morgan Stanley (NYSE:MS) strategists urged investors to "keep the faith" in their 2021 outlook note.

"We think this global recovery is sustainable, synchronous and supported by policy, following much of the 'normal' post-recession playbook. Overweight equities and credit against cash and government bonds, and sell dollars."

For stocks, the analysts see earnings-per-share growth of between 25% and 30% across regions, with double-digit total returns through the end of 2021 that should helped power the S&P 500 to 3,900 points from its current 3,585 points.

BREXIT

Besides the virus, Brexit trade talks were chief among European investors' concerns on Monday, with hopes for a breakthrough ebbing slightly to leave sterling weaker against the dollar and the euro.

The British pound gave up early gains to edge lower against the dollar , changing hands at 1.3180 per dollar, and against the euro as well. The pound last stood at 89.78 pence per euro (EURGBP=D3).

While the departure of hardline adviser Dominic Cummings from Downing Street is seen as a positive, perhaps allowing more British concessions, Britain's chief Brexit negotiator David Frost said on Twitter that talks "may not succeed".