The prospect of persistently low interest rates boosts stocks
A public holiday in the United States made trading conditions thin.
On Monday, global equity markets posted their longest streak in three months, buoyed by hopes that US rates would stay low for longer and rumors of further stimulus measures in Japan and China. A holiday in the United States made trading conditions thin, but the MSCI World Index for all countries rose 0.3%, hit a new record, and was on its way to its seventh consecutive closing high. In Europe, the STOXX index of 600 European companies rose by 0.8% and thus approached the record levels of August. Norsk Hydro (OTC: NHYDY) shares rose up to 5% to a 13-year high, and Rusal climbed more than 4% to its highest level in history after aluminum prices hit a 10-year high , as a coup in Guinea had increased security of supply. However, no manufacturer reported that it was affected. The price of three-month aluminum on the London Metal Exchange rose by up to 1.8% to $ 2,775.50 per ton, the highest level since May 2011. Bauxite from Guinea for delivery to China was last valued by Asian Metal at $ 50.50 per ton, 1% more than on Friday and the highest price since March 16, 2020. The coup contributed to the upturn in the market, which was mainly fueled by concerns about the offer in connection with China and the European Union's commitments to carbon neutrality, said Carsten Menke, Head of Next Generation Research at Julius Baer. "We are convinced that the current effects of carbon neutrality on aluminum are overstated and that prices are decoupled from fundamentals," said Menke. "Nevertheless, the short-term price risks are still directed upwards." In Asia, the broadest MSCI index for Asia Pacific stocks outside of Japan rose 0.6% overnight to its highest level since late July. Japan's Nikkei index rose 1.8% to a five-month high, continuing its rally on hopes the new prime minister would fuel additional tax spending in Japan. The hope of new fiscal and monetary policy impulses from Beijing caused the Chinese blue chips to rise by 1.9%. The Nasdaq futures rose 0.4% while the S&P 500 futures rose 0.3%. Investors were still preoccupied with assessing the impact of the September employment report, which showed significantly lower-than-expected job growth, but also an increase in wages. The latter was enough to drive up the yields on government bonds with longer maturities and steepen the yield curve, even if the markets speculated whether the US Federal Reserve would start tapering later than previously assumed. "Employment slowed sharply in August and there are few signs of a recovery in the labor supply," said Jonathan Millar, Barclays economist (LON: BARC). “This puts the Fed in a bind as it has to weigh the risks of a sharp drop in demand against the risks of tight supply and inflation.” We still expect the Fed to announce the tapering in September, but we expect it to it starts in December rather than November. QE is likely to end in mid-2022. " The rise in US 10-year yields to 1.33% limited the pressure on the dollar from poor labor data, although the index still hit a monthly low before stabilizing at 92.26. The dollar traded hands against the yen at 109.85, while the euro traded at $ 1.1866 after hitting a five-week high of $ 1.1908 on Friday. The European Central Bank is holding its meeting this week, and a number of supporters are calling for the bank's extensive bond-buying program to be scaled back, although President Christine Lagarde has been somewhat cautious. The yields on government bonds in the euro zone showed little movement on Monday, with the yield on the 10-year German government bond stable at -0.37%. "We expect the ECB to announce a reduction in the PEPP (Pandemic Emergency Purchase Program) for the fourth quarter at its September meeting as financial conditions ease," said analysts at TD Securities. "All other monetary policy levers are likely to be put on hold, with inflation projections revised significantly upwards for this year and next. The risks to communication are high and Lagarde will want to avoid sounding overly aggressive and instead 'insistence