LDN - Business

Metals and stocks shine amid economic optimism

[May 20, 2024] By Tom Westbrook and Alun John

SINGAPORE/LONDON (Reuters) - World shares, gold and copper started the week near record highs, buoyed by investor optimism due to slower inflation, economic growth and China's efforts to address its property crisis.

Gold climbed more than 1% to a record $2,449.89 an ounce, while three-month copper on the London Metal Exchange surged as much as 4.1% to a historic high of $11,104.50, after climbing 28% so far this year. [GOL/] [MET/L]

That the two metals were rallying together was notable, said analysts at Rabobank, as the two tend to "provide different signals, with copper being reflective of the economic outlook - owing to its importance as an industrial input - and gold being an indicator of broader sentiment."

They suggested the shift by central banks into bullion was one factor behind the moves, and also possibly a shift of household savings from stocks into commodities.

Also in the mix, at least for copper, was expected demand for commodities from China after it announced "historic" steps on Friday to stabilise its property sector, with the central bank facilitating 1 trillion yuan ($138 billion) in extra funding and local governments set to buy some apartments.

Beijing on Monday left benchmark rates on hold, as expected.

BRIGHT SPOTS

MSCI's broadest index of Asia Pacific shares outside Japan rose to its highest in two years on Monday while the benchmark provider's world share index was up a whisker, just shy of Thursday's all-time peak.

Blue chip indexes in France, Britain and Germany, which also hit records last week, were all up 0.2-0.5%. [.EU]

"Global economic bright spots continue to prevail," said Vincent Chaigneau, head of research at Generali Investments, pointing to easing inflation and rising wages supporting real disposable income and bolstering domestic demand.

U.S. inflation slowed a touch in April, data showed last week, causing markets to position cautiously for a September rate cut by the Federal Reserve and driving a cross-asset rally.

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People walk on an overpass past office towers in the Lujiazui financial district of Shanghai, China October 17, 2022. REUTERS/Aly Song/File Photo

British inflation data is due Wednesday and will be a crucial factor in assessing if the Bank of England will cut rates in June - when the European Central Bank is also set to ease policy - or holds off till August.

Also due this week are results from chip darling Nvidia, global business activity data, a New Zealand rate decision, and remarks from U.S. policymakers and the minutes of their latest meeting.

Two-year U.S. Treasury yields ended last week four basis points (bps) lower at 4.825% and were steady on Monday. Ten-year U.S. yields were down 8.4 bps last week at 4.42%. [US/]

BIG IN JAPAN

Speculation has grown that Japanese rates will rise off zero, driving government bond yields there to their highest in more than a decade.

Ten-year yields went up 2.5 bps to 0.975%, the highest since 2013, though the wide gap to U.S. yields left the yen little changed at 155.67 per dollar. [JP/]

The dollar logged its largest weekly drop on the euro in two-and-a-half months last week, but was steady on Monday at $1.08735. [FRX/]

Brent crude futures rose to a one-week high of $84.25 a barrel after a helicopter crash killed Iran's president and Saudi Arabian state news flagged a health issue for the king, threatening fresh instability in the Middle East. [O/R]

If Mideast conflict picks up, "we could see inflationary pressures due to a potential rise in oil prices," said Tareck Horchani, head of dealing, prime brokerage at Maybank Securities in Singapore.

Unrest in French territory New Caledonia drove up prices for its major export, nickel, and silver, which was chasing gold higher, broke above $30.

(Reporting by Tom Westbrook; Editing by Sam Holmes and Bernadette Baum)

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