World shares hit their highest
level since June 2008 and the dollar touched a fresh 3-1/2-year
high against the yen on Friday, ahead of U.S. jobs data expected
to point to a continuing pick up in the world's biggest economy.
China also gave markets a boost as official data showed
February exports grew 21.8 percent versus a year ago, more than
double the expected rise.
European shares, which have rebounded strongly
after last week's Italian election and U.S. spending
cuts-related wobble, were up 0.5 percent by mid-morning and on
track for their biggest weekly gain since the start of the year.
Japan's Nikkei hit a 4-1/2 year high in Asian trading and
0.3, 0.7 and 0.5 rises by London's FTSE 100, Paris's
CAC-40 and Frankfurt's DAX helped MSCI's world
share index to its highest level since late June
2008.
"There appears to be a strong risk-on mood in the market at
the moment," said Ken Wattret, co head of European market
economics at BNP Paribas.
"The negativity from the Italian elections was shrugged off
pretty quickly, the Fed has made it clear that its policy will
remain accommodative. If we get a get a good set of payrolls
numbers, that will further fuel that sentiment."
Investors have been returning to stocks and other riskier
assets over the last eight months as slowly improving world
growth has been bolstered by the European Central Bank's pledge
last August to prevent a break-up of the euro.
Friday's U.S. payrolls report, due at 1330 GMT is expected
to show U.S. employers added 160,000 jobs last month, picking up
slightly from January's 157,000 count.
It is key to gauging the Federal Reserve's policy course
following the central bank's promise that as long as inflation
doesn't pose a threat it will keep U.S. interest rates near-zero
until unemployment falls to 6.5 percent.DOLLAR STRENGTH
In the currency market, the sudden spike in tensions on the
Korean peninsula added to the more dominant U.S. growth-led
demand for the dollar.
Having said earlier in the week it was scrapping its
armistice with South Korea, North Korea threatened the United
States on Thursday with a preemptive nuclear strike after
accusing it of warmongering.
The dollar was up 0.2 percent against a basket of
major currencies but most of the focus was on its continued rise
against the yen as it hit a 3-1/2 year high of 95.53 yen.
If the Bank of Japan's new leaders expands its stimulus
programme next month as expected, the dollar could trade in the
95-98 yen area or even open the way for a test of 100 yen, said
Ronald Ip, Director of Wealth Solutions Group for HSBC Global
Markets.
The euro, meanwhile, eased 0.1 percent, but clung to
the bulk of the gains made the previous day, after the European
Central Bank wrong-footed investors who had positioned for a
more clear-cut signal on rate cuts from its head Mario Draghi.
Data from the euro zone continued to support the calls for a
rate cut that some of the ECB's members had been pushing for at
the bank's monthly meeting.
Although it was slightly better than had been expected,
Spain's industrial output fell 5 percent year-on-year in
January, the seventeenth month of declines. France's central
bank also maintained its view that its economy will only just
dodge recession in the first quarter of the year.
GRADUAL GAINS
With demand for low-risk assets cool ahead of the U.S. data,
German Bund futures were little changed at 142.86 by mid-morning
having fallen the previous day after the ECB's less dovish than
expected tone.
Italian bonds continued to claw back the
ground they lost after last week's inconclusive election result
re-ignited concerns about its fiscal rehabilitation programme.
The stronger dollar and the bright Chinese data were also
the focus of commodity markets. Most of the world's raw
materials are bought and sold in dollars so its movements can
have a strong influence on prices.
Oil prices steadied above $111 a barrel, leaving
them almost bang in line with where they started the year, while
both copper and gold were little changed.
After a week which has seen five the world's top 10 central
banks decide to leave policy unchanged in the face of a very
modest global growth outlook, expectations for gradual gains in
riskier assets are unchanged.
"We continue to look for ways to gradually build risk rather
than reduce, and what we're seeing from the central banks leaves
us unchanged in that view," Johan Jooste, chief market
strategist at Merrill Lynch Wealth Management said.
"It's not like we're sittings on our hands. What we're doing
is, at the margin, adding risk rather than piling straight into
it at these levels."
