Dollar, global stocks
firm as 2017 trading starts in earnest
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[January 03, 2017]
By Marc Jones
(Reuters) - Upbeat data from China helped lift global markets as 2017
trading started in earnest on Tuesday, with the dollar notching its
biggest gain in three weeks, oil on a tear and European stocks setting a
Base metal prices and bond yields also advanced, as the
better-than-expected factory growth in China dovetailed with higher
inflation data in Europe to give investors a solid start to the new
Much of Europe had been open on Monday but it was the first day back for
its biggest stock market, Britain's FTSE 100, and it wasted no time in
hitting a new record high of 7,196 points with a 0.7 gain.
Germany's DAX and France's CAC 40 climbed too and among individual stock
movers, Italian banks were back amongst the top risers, with
newly-merged Banco BPM up 4.6 percent on its second day of trading.
Commodity-linked stocks jumped 1.3 percent as oil and metals prices
cheered the China data that had showed output from the country's giant
manufacturing sector reaching a near six-year high.
It bolstered the 'reflation' theme that dominated the latter stages of
2016 and helped get currency and bond markets back in their pre-break
rhythm after a mixed recent run.
The U.S. dollar racked up its biggest rise in almost three weeks against
a basket of the world's other major currencies to leave it just 1
percent off December's 14-year high.
Benchmark European government bond yields also tacked 5-8 basis points
higher as the first inflation readings out Germany and in France pointed
to a higher euro zone figure which is due on Wednesday.
Long-term inflation expectations in the euro zone, measured by the
five-year, five-year forward rate <EUIL5YF5Y=R>, are near their highest
levels in more than a year and close to the ECB's near 2 percent target,
as the central bank prepares to pare back the pace of its money-printing
"Until just a few weeks ago, the general consensus was that upside
inflation risks were very limited however... the inflation rate
scheduled to be published today is likely to reveal a significant
uplift," said DZ Bank strategist Birgit Figge.
In commodities, oil prices jumped over 2 percent in Europe as the China
data fed into a market that is being buoyed by hopes a deal including
OPEC and non-OPEC producer countries will drain the recent global supply
Oil was the world's best-performing major asset class in 2016, with a
gain of around 50 percent and global benchmark Brent was up 2.7 percent
at $58.31 by 0945 GMT as U.S. crude topped $55 a barrel.
"Markets will be looking for anecdotal evidence for production cuts,"
Ric Spooner, chief market analyst at CMC Markets said.
"The most likely scenario is OPEC and non-OPEC member countries will be
committed to the deal, especially in early stages."
Overnight in Asia, MSCI's broadest index of Asia-Pacific shares rose 0.6
percent as most regional markets reopened after the New Year holiday
although Japan's Nikkei was still closed.
Australian shares were the best performers in the region, closing
up 1.2 percent. Hong Kong's Hang Seng rose 0.7 percent while in
China, both the CSI 300 index and the Shanghai Composite climbed 1
China was Asia's worst performing major stock market in 2016 with a 11.3
percent loss in its worst year in five.
[to top of second column]
A man looks at an electronic board showing the stock market indices
of various countries outside a brokerage in Tokyo, Japan, November
16, 2016. REUTERS/Toru Hanai
"A year ago, the Chinese markets kept everyone on their toes," said
Jingyi Pan, market strategist at IG in Singapore, said following the
China data referring to market turmoil that engulfed global investors
"I donít think that we will see a repeat given that the global economy
has a better foothold compared to a year ago," Pan said.
The positive Chinese news also lifted the Australian dollar, which added
0.6 percent to $0.7230, while gold sagged, with the precious metal
dropping 0.3 percent to $1,148 an ounce.
Back in Europe, the pick ups in Germany and French inflation came on the
heels of data on Monday showing manufacturers ramped up activity at the
fastest pace in more than five years in December.
The positive numbers failed to shake the euro out of its doldrums,
however, with the common currency slipping 0.3 percent to $1.0426.
Investors were also keeping an eye on the Chinese yuan after the central
bank nearly doubled the number of foreign currencies in a basket used to
set the renminbi's value.
Starting on Jan. 1, the number of currencies in the CFETS basket
increased to 24 from 13, with new entrants including the Korean won, the
South African rand and the Mexican peso.
The country's foreign exchange regulator also said it would step up
scrutiny of individuals' foreign currency purchases and strengthen
punishment for illegal outflows, although the $50,000 annual individual
quota will remain unchanged.
The renminbi posted its biggest annual loss since 1994 last year, with
the dollar up almost 7 percent versus the Chinese currency.
In its first fix since the changes, the Chinese central bank set the
official yuan midpoint at 6.9498 per dollar on Tuesday, compared with
the previous close of 6.9467.
MSCI world equity index, which tracks shares in 46 countries,
MSCI's main European Index
European stocks or the broader Euro STOXX 600
U.S. crude oil, Brent crude futures
German Bund futures
The dollar against a basket of six major currencies, (weighted geometric
mean of the dollar's value compared with 6 other major currencies which
are: the euro at 57.6 percent weight, Japanese yen 13.6 percent, Pound
sterling 11.9 percent, Canadian dollar 9.1 percent weight, Swedish
krona4.2 percent and Swiss franc 3.6 percent.
(Additional reporting by John Geddie and Christopher Johnson in London;
Editing by Raissa Kasolowsky)
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