Global stocks and euro gain ahead of US jobs data

LONDON/SYDNEY (Reuters) - World stocks held near three-month highs and the euro also remained close to a three-month peak, thanks to a larger than expected European stimulus boost and on hopes of a global economic rebound.

Investors are pricing in an economic recovery despite data showing the severe damage wrought by coronavirus lockdowns. Later in the day, U.S. nonfarm payrolls figures are expected to show further deterioration in the country’s jobs market.

Led by a jump in banks, insurers, vehicle manufacturers and travel, the pan-European STOXX 600 rose 1.1%, still enjoying a boost from the European Central Bank’s pledge to supply extra cash to its Pandemic emergency purchase program (PEPP).

Europe has now clawed back two-thirds of the losses incurred following the coronavirus outbreak and Bank of America analysts said on Friday they expect European stocks to rise another 10% by the end of September on expectations of a pick-up in business activity.

MSCI’s broadest index of Asia-Pacific shares outside of Japan rose 0.9%, reversing early losses to stay near a 12-week high.

The index is up about 7.6% this week, on track for its best weekly showing since December 2011.

Emerging market stocks were up 0.7% and also on course for their best week since December 2011.

“The market has been driven by the sentiment that everything is going well and a recovery is in sight for the second half of the year. But the big question is is the market ahead of fundamentals? There’s room for consolidation,” said Francois Savary, chief investment officer at Swiss wealth manager Prime Partners.

E-mini futures for the S&P 500 rose 0.8%.

Analysts cautioned about the heady levels, with equity valuations at their highest since the dot.com boom in 2000, according to Matthew Sherwood, investment strategist for Perpetual.

World equity markets were thrashed in March when they hit “bear territory” on fears the COVID-19 driven lockdowns would push the global economy into a long and deep recession.

Market sentiment has since been bolstered by central bank stimulus but Bob Michele, chief investment officer and head of the global fixed income, currency & commodities group at J.P.Morgan Asset Management, warned the massive quantitative easing would distort pricing and mute traditional signals from bond markets on growth and inflation, advocating “co-investing” alongside central banks.

The U.S. employment report is expected to show nonfarm payrolls fell in May by 8 million jobs after a record 20.54 million plunge in April, while the unemployment rate is forecast to rocket to 19.8%, a post-World War Two record, from 14.7% in April.

Set for a third straight week of gains, the euro rose to $1.1380, its highest level since 20 March and was on course for a weekly jump of 2.5%.

The dollar index made a tepid recovery, rising 0.08% to 96.84, but remained on track for its third consecutive week of losses and close to its lowest in nearly three months.

The U.S. Federal Reserve holds its regular two-day policy meeting next week.

The Australian dollar was 0.3% higher at $0.6968, having briefly topped $0.70 for the first time since early January.

Long-dated German government bond yields rose six basis points to their highest level since January. The bonds were trading at a negative yield just 10 days ago. Italian and other low-rated Southern European borrowing costs dropped further after the ECB’s hefty support effort.

U.S. crude oil gained 2.4% to $38.32 per barrel and Brent added 3.2% to $41.25, with the benchmarks on track for a sixth week of gains, thanks to output cuts amid signs of improving fuel demand.

Spot gold was down 0.2% at $1,708.70 per ounce, set for a third consecutive weekly decline.