London: World stocks edged closer to a 17-1/2 month peak on Tuesday as a weak dollar-inspired rally in commodities and evidence of a recovery in US consumption spurred buying in risky assets.
The dollar fell to its lowest in almost a week against a basket of currencies, hit in part by a rising euro after Greece managed to raise €5 billion from the debt market on Monday. Oil rose above $82 a barrel while mining shares rose broadly in Europe as the second quarter drew to a close.
Firmer energy and mining shares as well supported Wall Street which also took heart from data showing US consumer spending rose for a fifth straight month. This normally accounts for about 70% of US economic activity.
“There’s been no bad news out from banks and metals prices are strong,” said Colin McLean, managing director at fund manager SVM in Edinburgh.
“But there may be an element of window dressing to it (the market’s rise) at the end of the quarter. Some institutions may have found themselves with more cash than they planned.” MSCI world equity index rose 0.3% to its highest since early January. Just a few points more rise in the index will bring it to levels seen soon after the collapse of Lehman Brothers in September 2008. The index, however, has risen only 3 percent this year.
The FTSEurofirst 300 index rose 0.3% while emerging stocks gained 0.5%. US stock futures rose around 0.2% pointing to a firmer open on Wall Street. US crude oil rose 0.2% to $82.31 a barrel.
German government bond futures rose 20 ticks.
Although Greece managed to sell its 7-year bonds on Monday, demand was subdued ahead of the Easter holiday in the first test of investor appetite since last week’s EU-backed debt support deal.
Order levels on the new bond stood at around €7 billion compared with more than €16 billion in interest shown for a benchmark 10-year issue, whose success in early March had eased some of the nerves over Greece’s financing.
The premium investors demand for holding 10-year Greek benchmark bonds rather than Germany’s rose to a one-week high of 336 basis points.
“Given the considerable challenges faced by Greece in meeting its ambitious targets we believe markets will have reason to revisit them over the coming months,” SEB said in a note to clients.
“Proposed spending cuts are politically challenging, being extremely unpopular amongst the general public, while projected revenue increases assume unrealistically high economic growth. Markets are now looking forward to initial evaluation of the country’s progress starting 15 May.”
The dollar fell 0.2% against a basket of major currencies while the euro rose to its strongest in nearly two months to ¥125.45. The single currency was steady at $1.3480 .
The Australian dollar rose to US$0.9199, helped by higher commodity prices and growing talk of an interest rate hike.