LONDON: World stocks rose and the dollar slipped on Monday, Oct 11 as investors bet on further asset buying by the U.S. Federal Reserve and a continuation of global currency flows towards emerging markets.
The dollar slid to a 15-year low against the yen and was flat to weaker against the euro. U.S. and Japanese markets were closed for holidays.
Finance policymakers meeting over the weekend in Washington produced no quick fix for global economic imbalances, providing no barriers to the cheap money trade of selling dollars to buy emerging market assets and commodities.
Reflecting this, MSCI's main emerging market stock index was up another half a percent for a nearly 12 percent year-to-date gain. JPMorgan's EMBI+ index also showed investors snapping up emerging market government debt.
Both moves are continuations of recent massive flows into emerging markets in a bid for higher yields and higher growth than are available in developed economies, particularly the United States.
EPFR Global said in its latest flow report at the end of last week that emerging market equity fund flows had hit a 33-month high and emerging bond funds had absorbed more than $1 billion in a week.
"It is increasingly being seen as the trade for all seasons," said David Shairp, global strategist at JPMorgan Asset Management. Friday's U.S. jobs data, which was worse than expected, raised expectations that the Fed will buy more assets under its quantitative easing (QE) programme, essentially trying to pump up the ailing U.S. economy by printing more money.
This generally drives investments out of dollar assets and towards higher-yielding ones.
But Shairp reckons many in the markets also see the flow patterns continuing even if there is no new QE, with investors then betting on higher growth abroad than in the U.S. economy.
Hence the trade for all seasons.
''
EUROPE ALONE
With the U.S. and Japan closed, developed market trading centred on Europe, where the FTSEurofirst 300 gained 0.2 percent, taking the year-to-date gain up to around 2.5 percent.
The focus was mainly on U.S. events.
"The market is clearly expecting quantitative easing and has priced that in," said Richard Lacaille, global chief investment officer at State Street in London. "The (U.S.) data continue to be as expected, part of a slow recovery."
Attention was also beginning to build on the upcoming earnings season. Intel and JP Morgan are among companies reporting later in the week.
On currency markets, the dollar slipped. It was down 0.1 percent against a basket of major currencies.
"There looks to be no basis for agreement on currency imbalances from the weekend meetings and the U.S. looks set to continue to pursue loose monetary policy going forward" said Neil Mellor, currency strategist at Bank of New York Mellon.
The dollar sank to 81.37 yen in early Asia trade, triggering another round of speculation about possible intervention by Japan to weaken the yen. It was later at 82 yen.
The euro was flat at $1.3939.
Euro zone government bond yields were flat to higher. - Reuters
The dollar slid to a 15-year low against the yen and was flat to weaker against the euro. U.S. and Japanese markets were closed for holidays.
Finance policymakers meeting over the weekend in Washington produced no quick fix for global economic imbalances, providing no barriers to the cheap money trade of selling dollars to buy emerging market assets and commodities.
Reflecting this, MSCI's main emerging market stock index was up another half a percent for a nearly 12 percent year-to-date gain. JPMorgan's EMBI+ index also showed investors snapping up emerging market government debt.
Both moves are continuations of recent massive flows into emerging markets in a bid for higher yields and higher growth than are available in developed economies, particularly the United States.
EPFR Global said in its latest flow report at the end of last week that emerging market equity fund flows had hit a 33-month high and emerging bond funds had absorbed more than $1 billion in a week.
"It is increasingly being seen as the trade for all seasons," said David Shairp, global strategist at JPMorgan Asset Management. Friday's U.S. jobs data, which was worse than expected, raised expectations that the Fed will buy more assets under its quantitative easing (QE) programme, essentially trying to pump up the ailing U.S. economy by printing more money.
This generally drives investments out of dollar assets and towards higher-yielding ones.
But Shairp reckons many in the markets also see the flow patterns continuing even if there is no new QE, with investors then betting on higher growth abroad than in the U.S. economy.
Hence the trade for all seasons.
''
EUROPE ALONE
With the U.S. and Japan closed, developed market trading centred on Europe, where the FTSEurofirst 300 gained 0.2 percent, taking the year-to-date gain up to around 2.5 percent.
The focus was mainly on U.S. events.
"The market is clearly expecting quantitative easing and has priced that in," said Richard Lacaille, global chief investment officer at State Street in London. "The (U.S.) data continue to be as expected, part of a slow recovery."
Attention was also beginning to build on the upcoming earnings season. Intel and JP Morgan are among companies reporting later in the week.
On currency markets, the dollar slipped. It was down 0.1 percent against a basket of major currencies.
"There looks to be no basis for agreement on currency imbalances from the weekend meetings and the U.S. looks set to continue to pursue loose monetary policy going forward" said Neil Mellor, currency strategist at Bank of New York Mellon.
The dollar sank to 81.37 yen in early Asia trade, triggering another round of speculation about possible intervention by Japan to weaken the yen. It was later at 82 yen.
The euro was flat at $1.3939.
Euro zone government bond yields were flat to higher. - Reuters
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