NEW YORK (Reuters) – A gauge of global equity markets inched toward an all-time peak on Tuesday, with the S&P 500 nearing a record high, lifted by hopes for fresh U.S. stimulus and signs of a growing American economy that spurred yields to climb and thrashed gold prices.
Hopes of steady economic recovery from the coronavirus pandemic boosted sentiment, helping European stocks hit a near three-week high as automakers gained on a surge in China sales numbers.
The S&P 500 neared its Feb. 19 peak and levels last seen before the onset of the crisis, when investors started dumping shares in anticipation of what proved to be the biggest U.S. economic slump since the Great Depression.
The dollar slid from one-week highs and the euro topped $1.18 as investors flocked to currencies that benefit from an improving global market outlook, while gold prices dived as expectations of a U.S. stimulus deal boosted risk appetite.
U.S. producer prices increased by the most in more than 1-1/2 years in July, and the Labor Department’s producer price index for final demand rose 0.6%, driven by a surge in portfolio management fees and rising costs for gasoline.
The market believes the economy will grow and that the pandemic will be overcome, said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.
“Short term, we’re going to get stimulus,” Ghriskey said. “Longer term is that we’re going to get through this virus. We’re going to have a vaccine eventually.”
MSCI’s benchmark for global equity markets .MIWD00000PUS rose 0.73% to 568.17, off less than 3% from its record, while Europe’s broad FTSEurofirst 300 index .FTEU3 closed up 1.64% at 1,436.83.
On Wall Street, the Dow Jones Industrial Average .DJI rose 0.94%, the S&P 500 .SPX gained 0.35% and the Nasdaq Composite .IXIC dropped 0.16%. The S&P was less than half a percentage point from a fresh record.
Russian President Vladimir Putin’s announcement that Russia had become the first country to grant regulatory approval to a COVID-19 vaccine after less than two months of human testing aided sentiment, some analysts said.
“I’m not sure people put a lot of credence in the Russian vaccine, which hasn’t been tested,” Ghriskey said. “But who knows? Treatments are getting better and the economy is slowly improving.”
Yields on the benchmark 10-year U.S. Treasury note US10YT=RR jumped six basis points to 0.638%, a sign investors anticipate growth. Yields dipped as low as 0.504% last Thursday, the lowest since March.
Sterling and commodity-linked currencies such as the Australian and Canadian dollars, as well as the Norwegian crown, gained against a broadly weakening dollar.
The euro EUR= rose 0.23%, to $1.1763. The dollar index =USD fell 0.129%, and the Japanese yen weakened 0.56% versus the greenback at 106.54 per dollar.
Gold sank as much as 4.3%, facing its worst one-day rout in seven years. Other precious metals also took a beating, with silver XAG= plunging as much as 8% – its biggest daily decline since mid-March.
Spot gold prices XAU= fell $80.1413, or 3.95%, to $1,947.12 an ounce.
Graphic: German vs US real yields here
Graphic: World stocks market cap here
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