International shares relaxation after a “implausible” month, Chinese language factories speed up

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© Reuters. Investors look at screens displaying stock information for a Shanghai brokerage house

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Posted by Wayne Cole

SYDNEY (Reuters) – World stocks paused to evaluate a record month on Monday as the prospect of a vaccine-related economic recovery next year and even more free money from central banks eclipsed immediate concerns over the coronavirus pandemic .

A survey found that factory activity in China significantly exceeded forecasts in November, and the country’s central bank surprised with a dose of cheap credit. The blue chips rose by 1.3% during the day and 7.4% for the month.

The run on risk has also benefited oil and manufactured goods while undermining the dollar and safe haven gold.

“November is set to be a great month for equity investors with Europe taking the lead at the country / regional level,” said NAB analyst Rodrigo Catril.

Many European stock exchanges have the best month ever with 21% and Italy with almost 26%. The MSCI measurement of world stocks is up 13% so far in November, while that is up 11% to all-time highs.

Early Monday, MSCI’s broadest index for stocks in the Asia-Pacific region outside Japan fell 0.4% and rose nearly 11% for the month. This is the best performance since the end of 2011.

225 was down 0.4%, but was still 15.4% m / m above its largest increase since 1994.

The E-Mini-Futures for the S&P 500 fell 0.4% and the EUROSTOXX 50-Futures fell 0.6%.

“The markets are overbought and there is a risk of a short-term pause,” said Shane Oliver, head of investment strategy at AMP (OTC 🙂 Capital.

“However, we are now in a seasonally strong time of year and investors have yet to completely rule out the potential for a very strong rebound in growth and earnings over the next year as the incentives combine with vaccines.”

Cyclical recovery stocks, including resources, industrials and financials, should outperform relatively, he added.

The rise in stocks has increased competitive pressures on safe haven bonds, but much of that has been cushioned by expectations of greater asset purchases by central banks.

The Swedish Riksbank surprised last week by expanding its bond-buying program, and the European Central Bank is expected to follow suit in December.

Dollar in decline

Federal Reserve Chairman Jerome Powell testifies to Congress Tuesday while speculating about further policy action at his next session in mid-December.

As a result, US 10-year yields will end the month almost exactly where they started at 0.84%. This is solid performance given the abundance of stocks.

The US dollar wasn’t that lucky.

“The idea that a potential Treasury Secretary (Janet) Yellen and Fed Chairman Powell could work more closely together to shape and coordinate super-light monetary policy and massive fiscal stimulus that could bring about a quick recovery from the pandemic has the dollar under Put the pressure on, “said Robert Rennie, head of financial markets strategy at Westpac.

Against a basket of currencies, the rate was 91.771 after falling 2.4% over the month to the lows of mid-2018.

The euro gained a tailwind due to the relative outperformance of European equities and rose 2.7% to 1.1967 USD over the month to date. A break from the September high at $ 1.2011 would pave the way to a 2018 high at $ 1.2555.

The dollar is even down against the Japanese yen, a safe haven of its own, shedding 0.7% to 103.89 yen in November, although it remains well above key support at 103.16.

The pound sterling was at $ 1.3334 after rising steadily to its highest level since September this month as investors bet that a Brexit deal would be brokered even as the deadline for talks grew longer.

A major victim of the risk rush was gold, which was near a five-month low at $ 1,771 an ounce, after losing 5.6% so far in November.

In contrast, oil has benefited from the prospect of a recovery in demand if vaccines allow travel and transportation to resume next year. [O/R]

Some profit-taking was set early Monday ahead of an OPEC + meeting to decide whether the producer group will extend large production cuts. Futures fell 52 cents to $ 47.66 while they fell 60 cents to $ 44.93 a barrel.

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