Wall Street set to follow Europe to new year highs

LONDON, Jan. 3 (Reuters) – Global markets started 2022 with confidence on Monday as European stocks hit record highs, Wall Street is expected to follow and oil prices and benchmark government bond yields advance also on the rise.

London traders were enjoying their last festive day off, but mainland Europe got off to a strong start, hitting an all-time high for the STOXX 600 Index (.STOXX) after an encouraging wave of data from the Eurozone and the Eastern Europe.

The euro zone manufacturing purchasing managers index (PMI) fell to 58.0 in December from 58.4 in November, but it corresponded to a first “flash” estimate despite the recent increase in coronavirus infections and was still comfortably above the 50 mark separating growth from contraction. Read more

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“We are seeing tentative but very welcome signs that the supply chain crisis that has plagued production chains across Europe is starting to recede,” said Joe Hayes, senior economist at IHS Markit who is compiling the survey PMI.

The data also showed that business buying inventories were increasing at a record survey rate in December. This meant that the input price index had fallen to its lowest level in eight months, even though it remained relatively high, allowing factories to raise prices at a much slower pace.

“Falling inflation rates are again a welcome sign, but we are still in warm territory,” Hayes added.

Stock exchanges in Germany (.GDAXI), France (.FCHI), Italy (.FTMIB) and Spain (.IBEX) rose 0.9% to 1.3% before what was to come. as a return to all-time highs for the Wall Street S&P 500 (.SPX) when it subsequently opened.

The S&P Index jumped nearly 28% last year, pushing the MSCI 50-Country Global Equity Index (.MIWD00000PUS) to its third consecutive year of double-digit gains. Read more

The confident start to the year was also evident in bond markets where German 10-year government bond yields – the benchmark for European borrowing costs – and US Treasury yields rose by 3 at 4 basis points, investors expecting a series of US interest rate hikes. This year. / FRX

For Bunds, the rate hikes had left them at their highest since November. The prospect of a rate hike also pushed eurozone bank stocks up 1.2% (.SX7E). Automakers (.SXAP) also rose 1.8% (.SXAP) after Tesla and Hyundai released bullish targets for this year. Read more

Global stocks saw their value increase by $ 10 trillion in 2021

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In currency markets, euro area data didn’t do much for the euro, as the focus remained squarely on the potential dollar (.DXY) rise if the Federal Reserve hiked rates US interest three times this year, as currently planned.

The Turkish lira had a turbulent start to the year, however, plunging as much as 5% as its central bank revealed it had used more than $ 3 billion of its reserves last month when the currency fell to low. record levels.

He spent the rest of the morning trying to recover, but he also intervened after the Turkish statistics agency also reported that annual inflation jumped much more than expected to reach 36% year-on-year in December, highest since September 2002. read more

“This reflects a vicious cycle of demand-driven inflation, which is very dangerous because the central bank had suggested that the pressure on prices was due to supply constraints and that there was nothing they could do about it.” said Ozlem Derici Sengul, founding partner of Spinn Consulting in Istanbul.

Another of the great dramas of 2021, the collapse of some of China’s biggest homebuilders, also came back to life overnight when shares in China Evergrande (3333.HK) were suspended pending publication. of “inside information”.

The company hit by default is the most indebted developer in the world. He set up a risk management committee saying he would actively engage with his creditors, but local Chinese media reported this weekend that a municipal government ordered him to demolish 39 buildings, due to illegal constructions. Read more

“The demolition order in Hainan will hurt the low confidence of home buyers who have stayed with the company,” said Conita Hung, director of investment strategy at Tiger Faith Asset Management.

Commodities markets also quickly regained their momentum after their excellent 18-20 months.

Oil climbed to $ 79 a barrel on Monday, supported by tight supply and hopes of further upturn in demand in 2022, spurred in part by the idea that the Omicron coronavirus variant is unlikely to stop again the world economy.

OPEC and its allies, known as OPEC +, are expected to stick to a plan to gradually increase production at a meeting on Tuesday.

Brent crude, which jumped 50% last year and is up 80% from the COVID-triggered lows of 2020, rose 1.3% to $ 78.86 a barrel. U.S. West Texas Intermediate (WTI) crude added $ 1.03, or 1.4%, to $ 76.24.

“Infection rates are on the rise around the world, restrictions are being introduced in several countries, the airline industry, among others, is suffering, but investor optimism is tangible,” said Tamas Varga of oil broker PVM. .

Five of the eight major Asian economies have shown improvement in their PMI numbers in recent days and all eight are in expansionary territory.

In China, the NBS manufacturing PMI hit a five-month high, marking a second month above 50 as production brakes and power cuts continued to fade. India’s equivalent IHS Markit reading edged down on Monday, but was still at 55.5.

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Global PMIs

Additional reporting by Alex Lawler in London, Oben Mumcuoglu and Halilcan Soran in Istanbul and Clare Jim in Hong Kong Editing by Gareth Jones and Chizu Nomiyama

Our standards: Thomson Reuters Trust Principles.

Mary I. Bruner