LDN - Business

World shares gain steam in bright 2022 opening

[January 04, 2022] By Tom Wilson

LONDON (Reuters) - World shares extended on Tuesday a bright start to 2022 as markets from Europe to Asia shrugged off worries the Omicron coronavirus variant could choke the global economic recovery, while the dollar rose after U.S. bond yields jumped.

The Euro STOXX 600 gained as much as 0.9% to hit a record of 494.55 points, topping its previous all-time high scaled a day earlier. Indexes in Germany, France and Britain rose between 0.7% and 1.3%.

Travel and leisure stocks jumped over 3%, with Ryanair adding 10% and British Airways-owner IAG gaining over 12%, reflecting expectations that Omicron's impact on the industry would be less severe than initially feared.

"As far as markets are concerned Omicron is in the rear view mirror," said Colin Asher, senior economist at Mizuho.

"The main focus was on a collapse in demand and now because demand has recovered so quickly, the focus is more on the supply... it will prolong supply chain delays and push prices higher rather than push activity down."

Wall Street was also set for gains after closing a day earlier at record highs, with e-mini futures for the S&P 500 index 0.4% higher.

The U.S. dollar rose to its highest since 2017 against the Japanese yen after U.S. Treasury yields jumped on Monday as traders bet on an early Federal Reserve interest rate hike to tame fast-rising inflation.

Euro zone bond yields held steady near their highest levels in around two months.

In a sign that economies may weather the spread of Omicron, factory activity in Asia and Europe grew in December, suggesting the direct hit from the variant on output appeared subdued.

Asian stocks were on the front foot following Wall Street's record highs on its first trading day of 2022, with MSCI's gauge of Asia Pacific stocks outside Japan up 0.5%.

Analysts said the gains for stocks reflected in part optimism over prospects for the U.S. economy.

"We are firmly of the view the U.S. is seeing boom conditions and a very tight labour market which will boost household incomes," said John Milroy, an Ord Minnett advisor in Sydney.

Major Wall Street indexes closed at record highs on Monday, with Apple Inc becoming the first company to reach a $3 trillion market value.

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A screen shows Nikkei index after a ceremony marking the end of trading in 2021 at the Tokyo Stock Exchange (TSE) in Tokyo, Japan December 30, 2021. REUTERS/Kim Kyung-Hoon

The tech giant's market capitalisation is now well above the combined value of the blue chips listed on London's FTSE 100.

The S&P index surged nearly 28% last year, driving MSCI's 50-country index of world stocks to its third consecutive year of double-digit gains.

The index was up 0.3% on the day.

LEAPING YIELDS

Benchmark U.S. 10-year yields leapt 12.5 basis points on Monday to touch 1.6420% for the first time since Nov. 24, as investors bet on a series of interest rate raises this year to combat rising inflation.

Money markets have fully priced in a first U.S. rate increase by May, and two more by the end of 2022.

That pushed the dollar to as high as 115.82 yen for the first time in four years.

The dollar index, which measures its performance against the yen and five other major currencies, held close to the one-week high of 96.328 reached a day earlier. It was last up 0.2%.

The Turkish lira slid as much as 4% against the dollar as Turkey girded for inflation to rise further after touching a 19-year peak. Last year the lira weakened 44%.

Commodity markets also were back in the swing of things after their nearly two-year resurgence to close out 2021.

Brent crude futures were up 0.8% at $79.64 a barrel at 1136 GMT, as investors embraced expectations that major oil producers will confirm a plan to add supply.

(Reporting by Tom Wilson in London, additional reporting by Sujata Rao and Kane Wu; Editing by Sam Holmes, Shri Navaratnam and Tomasz Janowski)

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