LONDON

World shares scaled yet another record high on Wednesday, propelled by a bullish growth and company earnings outlook, as well as investors’ unflagging enthusiasm for technology stocks.

Wall Street looked set for another upbeat session, with Dow Jones stock futures trading slightly higher.

And with oil prices at a 2-1/2-year top adding to tech-driven bullishness, world stocks have taken just nine days to surpass their previous record peak.

Emerging markets too were on a roll, with the main equity benchmark touching new six-year highs and little sign of spillover from Turkey where the lira plumbed a new record low.

Trading generally is starting to thin ahead of the US Thanksgiving holiday, while investors will also parse minutes from the last Federal Reserve meeting, though markets are pricing an extremely gradual policy tightening path.

Ipek Ozkardeskaya, senior analyst at asset manager London Capital Group, noted markets had also shrugged off doubts that the US President Donald Trump would be able to pull off promised tax reform. “There is some optimism in world equity markets,” Ozkardeskaya said.

“(But) we can’t say the rally will fade soon because if you look at volatility measures there are signs of no anxiety in the market,” she added, referring to the VIX index — known as Wall Street’s “fear gauge” which fell to around two-week lows.

A key feature of the rally has been all things tech, with the S&P technology index closing 1.2 per cent higher on Tuesday, helping all three Wall Street indexes to record highs.

That has fed through to Hong Kong’s Hang Seng Index which added around 1 per cent to vault past the 30,000-point level for the first time in 10 years.

The mood was slightly less buoyant on European shares where the pan-European STOXX 600 index rose 0.3 per cent to approach two-week highs and Britain’s FTSE benchmark was 0.5 per cent firmer as finance minister Philip Hammond presented a crucial budget to the country facing faltering economic growth.

Investors have so far shrugged off US rate rises, President Donald Trump’s inability so far to pass promised tax reforms, Britain’s looming European Union exit and Germany’s post-election political impasse.

Instead they have cited the strengthening global economy, booming trade and company earnings which are growing around 10-15 per cent.

Goldman Sachs for instance raised its earnings estimate for S&P 500 companies in 2018 and 2019, citing the expected US tax reform, above-trend global and US economic growth and slowly rising interest rates from a low base.

Morgan Stanley analysts also cited the cushion provided by ample global liquidity conditions.

“It is this liquidity (which is) creating risk absorbing capacity, making markets deal with idiosyncratic risks without allowing significant spillover effects,” they told clients, predicting another leg higher in equities.

Dow e-minis rose 0.2 per cent, while S&P 500 and Nasdaq futures were up 0.1 per cent.

Shaping up

So far the impending December rate hike by the US Federal Reserve and expectations of more tightening in 2018 have not soured the mood and nor have markets interpreted the recent flattening of the US bond curve as a warning signal.

The dollar pulled back 0.1 per cent against a basket of currencies, having taken a hit this week from sagging long-dated yields that have driven the Treasury curve — the gap between two- and 10-year yields — to the flattest in a decade.

The curve steepened slightly to around 60 basis points, trading just off the 57.4 bps low.

The yield curve in Germany, the Eurozone’s benchmark government bond issuer, flattened to its lowest in more than two months, catching up with the US curve.

Thirty-year German bond yields are down around 5 bps this week, according to Reuters data, as pension funds hunt for higher yields. In contrast, 2, 5 and 10-year bond yields have all risen marginally.

On other currencies, the euro edged higher for a second straight day, recouping more than half of its losses sustained after the German coalition collapse.

The pound was flat before the budget, though analysts expect negative reaction to be muted as the currency has weakened around 12 per cent against the dollar since Britain’s June 2016 vote to leave the EU.

“Sterling is still very cheap and still reacts more to good than to bad news as a result,” Societe Generale analysts wrote.

Another exception to the bullish mood was Turkey where expectations are growing of emergency central bank action to counter the lira’s slide to record lows.

Commodity markets too are benefited from the improved global growth outlook, with copper futures rising to two-week highs. Oil prices too jumped, with US crude up 2 per cent to 2-1/2-year highs due to cuts in piped Canadian crude and expectations of a prolonged Opec-led production cut.