By Richard Hubbard, Reuters and AFP
LONDON/HONG KONG–World shares were set to end a volatile week on a positive note on Friday and the dollar reached a 4-month high against the yen as worry dissipated about an end to the Federal Reserve’s stimulus. Volatility has eased as investors realize that scaling back the Fed’s bond-buying program, which will probably begin in the first quarter of next year, does not necessarily mean rates will rise soon afterwards. “I think people have got the message,” said Laurent Fransolet, head of European fixed-income strategy at Barclays. “Everyone is starting to differentiate between tapering and tightening.” Solid U.S. data has eased concern that weaker growth in China and the euro zone may set back the fragile global economic recovery. The data helped to bolster the optimistic tone, especially on world equity markets. On Wall Street, the Dow Jones Industrial Index closed above 16,000 for the first time ever. Europe’s share markets joined the trend. All the major European indices up as much as 0.5 percent in early trading. The broad FTSE Eurofirst 300 index of top European shares had risen by 0.25 percent as a key barometer of investor sentiment, the Euro Stoxx 50 Volatility index dropped 3.6 percent to reach its lowest level since early 2007. A lower reading is a sign of rising confidence. MSCI’s world equity index was up 0.2 percent, although it was still likely to end the week lower. “The markets have got a lot of liquidity and it’s going to be a gentle lift upwards for equities,” Michael Gallagher, managing director of IDEAGlobal. “We might see it slow waiting for the U.S. employment report and the December meeting of the Fed.” The Dow’s first close above 16,000 pushed most world stocks higher Friday but gains were kept in check by worries the Federal Reserve will cut its monetary stimulus soon.
In Europe, France’s CAC 40 rose 0.4 percent to 4,268.62 while Germany’s DAX and Britain’s FTSE 100 were little changed. Futures suggested more gains on Wall Street, with Dow and S&P 500 futures both up 0.1 percent.
The Dow has been propelled higher by a combination of solid corporate earnings, a steadily strengthening economy and the Fed’s monetary policy.
Since the start of the year, the blue chip index is up 22 percent. If it holds onto those gains, the Dow will have its best year since 2003. The Dow topped 14,000 in February and 15,000 in May.
Asian markets mostly rose on Friday after the Dow closed above the 16,000 level for the first time on the back of a slew of upbeat economic data. Tokyo rose 0.10 percent, or 16.12 points, to 15,381.72, well off earlier highs as the yen made inroads against the dollar in the afternoon. Sydney advanced 0.90 percent, or 47.6 points, to 5,335.9 and Seoul added 0.62 percent, or 12.45 points, to 2,006.23. Hong Kong was 0.49 percent higher, adding 115.99 points to 23,696.28. Shanghai ended 0.43 percent lower, slipping 9.39 points to 2,196.38 as profit-takers moved in after the index rose more than three percent over the week when Beijing unveiled a blueprint for reforming the economy. Gold fetched US$1,242.80 per ounce at 1107 GMT compared with US$1,247.52 on Thursday.