Global stocks bolstered by investor optimism and US jobs data

A trader works in the dealing room of the New York Stock Exchange (NYSE) in Manhattan, New York, United States, December 28, 2021. REUTERS / Andrew Kelly

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WASHINGTON / LONDON, Dec. 30 (Reuters) – A week-long rally in global stock markets showed little sign of slowing on Thursday as investors looked past the Omicron COVID-19 variant, bolstering gains for stocks and oil, while the dollar fell.

The sentiment was supported by signs that governments, despite coronavirus cases reaching record levels, are trying to limit the economic damage by relaxing isolation rules rather than resorting to lockdowns. Read more

The MSCI gauge of equities across the world (.MIWD00000PUS) gained 0.14%, while the pan-European STOXX 600 index (.STOXX) rose 0.31%.

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On Wall Street, the Dow Jones Industrial Average (.DJI) was up 0.19%, the S&P 500 (.SPX) by 0.24% and the Nasdaq Composite (.IXIC) by 0.53%.

Despite concerns, the opinion appears to be that the highly transmissible variant of Omicron COVID-19 will be less lethal than feared, said Holger Schmieding, chief economist at Berenberg.

“The markets are picking up the story of the rebound, the story of the recovery for 2022,” Schmieding said, noting that the rise in bond yields reflected expectations of an economic recovery and, subsequently, a reduced pace of support from the central bank.

There was also relief in Asia, where South Korea’s 5.1% rise in industrial production could indicate some easing of supply chain issues. Chinese stocks were up nearly 1% versus Beijing, signaling interest rate cuts in 2022 (.CSI300), though they are expected to end 2021 down 5.5%. Read more

Japanese stocks, on their last trading day of the year, slipped 0.4% for an annual gain of 4.9% but below a three-decade high reached in September (.N225). Shares of the semiconductor superpower Taiwan (.TWII) ended with an annual jump of 24%.

However, persistent inflation and the resulting hawkish turn by the US Federal Reserve are cause for concern for markets, with investors starting to consider a first rate hike as early as March.

“We have these headwinds of the pandemic, we have had headwinds due to energy prices and skyrocketing inflation rates… but chances are that many of these factors, if not all, are ‘subside in the first quarter of next year, “said Jussi Hiljanen, strategist at SEB. “But for a few months it will be very volatile and the markets will be tested.”

New claims for unemployment benefits in the United States fell in the week leading up to Christmas and benefit lists slipped to pandemic-era lows a week earlier, the Labor Department said on Thursday. . The data showed no impact on the use of the fast-spreading Omicron variant. Read more

Two-year US Treasury yields have jumped 55 basis points since September to settle at 0.75%, near the highest since March of last year. However, reflecting expectations of a relatively short and shallow rate hike cycle, 10-year yields reacted much less, rising about 1/32 of the price to a yield of 1.541%.

The Fed’s outlook combined with recent Omicron jerks to support the US dollar, which is expected to see a second month of gains. The greenback rose 0.096% against a basket of currencies, rebounding from a three-week low hit Wednesday when it was hit by the resumption of risk appetite.

The euro was trading down 0.1% to $ 1.1337,

The yen saw broad year-end selling over the past week, with the dollar hitting its highest level since mid-November at 115.2 yen.

“The front-end of the US rate market is forecasting further rate hikes in the curve now, so FX could be a battle, once again, between optimism about the global recovery and expectations about the Fed.” said Kit Juckes, strategist at Société. General.

However, oil prices have slowly risen, even amid concerns about growing demand and news that China has cut its first batch of crude oil import quotas by 11% in 2022, a sign that it would act against inefficient small refineries.

US crude recently rose 0.68% to $ 77.08 a barrel.

Brent, which has climbed more than 50% this year, was at $ 79.37, up 0.18% on the day.

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Report by Katanga Johnson in Washington; Additional reporting by Sujata Rao, Karin Strohecker and Julien Ponthus in London, Stefano Rebaudo in Milan and Wayne Cole in Sydney; Editing by Hugh Lawson, Carmel Crimmins and Dan Grebler

Our Standards: Thomson Reuters Trust Principles.

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