World Stocks Hit 30-Month High; Oil Dips

Reuters

World stocks hit a 30-month high on Thursday, driven by strong corporate earnings and cautious optimism on the U.S. economy from the Federal Reserve, while oil prices eased after hitting a 28-month high the previous day.

Unrest spreading across the oil-rich Middle East and North Africa had pushed London Brent crude prices to a multi-month high of $104.52 a barrel, but they dipped 0.2% on Thursday although the market remained volatile.

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The political tensions also helped boost the appeal of safe-haven assets, with the Swiss franc gaining ground while yields on U.S. 10-year Treasuries eased.

U.S. stock index futures pointed to a mixed opening on Wall Street with futures for the S&P 500 and the Nasdaq both down 0.1% by 1104 GMT while the Dow Jones futures were up by the same margin.

Robust earnings and merger activity have boosted global equities recently. Data from Thomson Reuters StarMine showed three quarters of U.S. companies met or beat market expectations for earnings in the fourth quarter.

"Many people are still optimistic about the market because the global economy is doing well and earnings for large U.S. companies have been quite good," said Heinz-Gerd Sonnenschein, equity markets strategist at Deutsche Postbank in Bonn.

Adding to positive sentiment, minutes from the U.S. Federal Reserve's Jan. 25-26 policy session showed officials raised their forecasts for economic growth last month, though they still expected slow progress in reducing unemployment.

World equities measured by the MSCI All-Country World Index rose 0.3%, hitting their highest level since August 2008.

The index has risen 4.6% so far this year, but its valuations remain modest against a 10-year average. The MSCI global index has a 12-month forward price-to-earnings of 12.5 times against a 10-year average of 14.8, Thomson Reuters Datastream shows.

The MSCI emerging market index was up 0.3%, though it is down 3.5% for the year as many investors have been shifting out of booming developing markets on concerns over inflation.

EMERGING MARKETS

However, some remain positive on emerging market equities.

"Emerging markets earnings remain solid and there are reasons to expect they will improve relative to developed markets," Citigroup said in a note. "Emerging market relative valuations are at their lowest level since 2008. The pullback provides an opportunity to buy." Europe's FTSEurofirst 300 added 0.1%, aided by forecast-beating earnings from Swiss food group Nestle and computer consultantcy Capgemini. In Asia, Japanese shares gained 0.3%, up for the fourth straight session to a 9-1/2 month closing high.

Copper prices, however, continued to lose steam, falling for the third straight session. They were down 0.9% after hitting a record high on Monday with traders saying high prices above $9,000 a tonne were cutting off some demand.

The dollar was down 0.3% at 0.9560 Swiss francs, while the euro fell 0.3% to 1.2977 francs.

"If events in the Middle East do escalate we will see safe haven flows which will help the Swiss franc, but equities are still holding up for now," said Kenneth Broux, market economist at Lloyds.

The dollar was largely steady against a basket of major currencies.

Persistent concerns about the euro zone's ability to tackle its debt crisis continued to weigh on the euro.

However, yields fell at a Spanish debt auction -- seen as a test of investor sentiment towards debt-laden euro zone sovereign issuers -- allaying fears the euro zone periphery would find it hard to issue long-term debt in tough market conditions.