World stocks edge higher; bonds stabilize

By Natsuko Waki

LONDON (BestGrowthStock) – World stocks rose on Friday as investors grew more confident about the prospect for economic recovery following robust U.S. and Chinese data, while Treasuries stabilized after a sell-off earlier in the week.

Friday’s data showed China’s imports and exports were much stronger than expected in November, providing robust numbers that served as a reminder that Chinese demand was still growing apace, boosting high-yielding currencies.

China’s central bank raised lenders’ required reserves by 50 basis points but left interest rates on hold, which also allayed investors’ concerns that aggressive policy tightening could slow China’s growth down too much.

“In recent weeks people have been talking about the possibility of a rate hike in China,” said Niels Christensen, currency strategist at Nordea in Copenhagen.

“Given they only announced a reserve requirement hike we are seeing a bit of a relief rally as it has given a small boost to risk appetite.”

The MSCI world equity index (.MIWD00000PUS: ) rose 0.15 percent while the FTSEurofirst 300 index (.FTEU3: ) gained the same amount. U.S. stock futures rose around a third of a percent, pointing to a firmer open on Wall Street later.

On Thursday, the benchmark S&P 500 index (.SPX: ) hit a two-year high with data showing first-time claims for jobless benefits fell more than expected last week.

TREASURIES RECOVER

U.S. Treasuries edged up thanks to a strong auction of 30-year bonds that reflected investor appetite. Treasuries sold off heavily earlier in the week on U.S. President Barack Obama’s plans to extend low tax rates. However, those plans hit some opposition ahead of a Senate vote next week.

Rising U.S. Treasury yields this week and growing inflation concerns in developing economies — together with the prospect of tighter Chinese policy — also encouraged investors to scale back their already overstretched bets on emerging markets.

Emerging stocks (.MSCIEF: ) lost 0.1 percent, underperforming their developed market counterparts.

“Data all suggest that further policy normalization is needed to keep China’s economy (Read more about the fastest growing economy.) on an even keel. So far, China has made only modest moves in this direction,” RBC said in a note to clients.

“We expect to see more urgency from Beijing in the months ahead as tackling inflation becomes a greater priority, with both rate hikes and currency appreciation likely to be employed.”

Ten-year Treasuries were up 8/32 in price to yield 3.185 percent, off a six-month high of 3.330 percent reached on Wednesday.

The sale of $13 billion of reopened 30-year U.S. bonds went through at a yield below the level trading on the open market, indicating investors bid aggressively for the debt, with strong demand particularly from foreign buyers.

The dollar (.DXY: ) fell 0.1 percent against a basket of major currencies, while the euro was steady at $1.3235.

U.S. crude oil rose 0.4 percent to $88.75 a barrel. The bund futures were steady.

World stocks edge higher; bonds stabilize