New Year cheer for global stocks as rally rumbles on

Friday, 3 January 2020 00:00 - - {{hitsCtrl.values.hits}}

London (Reuters): World stock markets began the New Year with a shot of Chinese stimulus, ensuring there was no immediate hangover after the wild gains of 2019.

News that China’s central bank was freeing another 800 billion yuan ($115 billion) for its economy came after US President Donald Trump tweeted on Tuesday that a long-awaited trade pact with Beijing would be signed on 15 January.

The double lift saw Europe’s main markets jump 0.8% to 1.3%, outpacing Asia’s overnight gains and putting them on course for their best opening session of a year since 2013.

MSCI’s broadest index of world shares added 0.2% to its 24% 2019 surge, which was the fourth best of all time. Higher US futures suggested solid gains on Wall Street too, with S&P 500 e-minis up 0.5%.

“Over a longer-term horizon, we believe global stocks have greater performance potential than global bonds, supported by continued growth and moderate inflation,” Franklin Templeton said in its 2020 outlook, although it stressed it remained cautious for now.

An upward revision to some otherwise gloomy euro zone manufacturing PMI data pushed inflation expectations higher. Germany’s 15-year bond yield briefly turned positive for the first time since July.

Bond yields tend to drive borrowing costs in the wider economy and their drop last year, as the Federal Reserve, European Central Bank and dozens of other central banks around the world cut interest rates, helped limit an economic slowdown.

“Although firms grew somewhat more optimistic about the year ahead, a return to growth remains a long way off,” said Chris Williamson, chief business economist at IHS Markit, which compiles the purchasing manager indices.