World shares gain, oil prices capped on hopes for US-Iran peace talks.
World shares gained on Wednesday, edging towards record highs after President Donald Trump said talks with Iran could resume over the next two days, with hopes for an end to the Iran war keeping oil prices below US$100 a barrel.
The MSCI All-Country World Index rose 0.1%, within sight of its all-time top and on course for its ninth straight day of gains.
European shares were muted, however, falling 0.1%. French stocks led the losses, falling 0.6%.
Corporate earnings remained in focus for investors. Among standout moves was French luxury group Hermes, which plunged more than 13% after it reported a hit to first-quarter sales linked to the Iran war.
Signs that diplomatic engagement would continue in the Middle East helped calm markets. Trump told ABC News that talks with Iran to end the war could soon resume and reach a deal, telling the world to watch out for an “amazing two days”.
Analysts at Deutsche Bank wrote in a memo that the developments had eased investor fears about a stagflationary shock, noting that “investors continue to believe the conflict will be a temporary one.”
Wall Street futures traded flat, suggesting that the recent rally in US shares would fizzle out.
On Tuesday, the Nasdaq climbed 2% to chalk up its 10th straight day of gains and the S&P 500 flirted with a record closing high. US producer inflation data also provided some encouragement as prices rose by less than economists expected in March, helping temper fears around war-driven inflation.
Asian shares outside Japan gained 1.1%, hitting their highest level in six weeks. Japan’s Nikkei climbed 0.9% and South Korea’s Kospi index added 3%.
Oil rose, with Brent crude futures adding 1.3% to US$96.04 a barrel, after falling 4.6% in the previous session.
Dollar depressed
The dollar, a traditional safe haven, lingered near six-week lows, surrendering nearly all the gains it had made since the Middle East war erupted on Feb 28.
The dollar index, which measures the US currency against six units, was last up 0.2% at 98.242.
“The failure of the US dollar to advance as much as we expected since the start of the conflict and the emerging signs of increased appetite for selling is an indication of the poor fundamental backdrop for the dollar ahead of the start of the conflict,” MUFG analyst Derek Halpenny wrote.
Elsewhere in currency markets, the euro fell 0.2% and last bought US$1.177, having hit a six-week top of US$1.181 overnight. Sterling was at US$1.355.
China’s onshore yuan weakened slightly, changing hands at around 6.8178 per dollar, after data showed a sharp slowdown in the country’s March exports as the Iran war boosted energy costs and hurt global demand.
Still, analysts say the Chinese currency’s long-term appreciation trend is intact, with hopes building for a diplomatic resolution to the Middle East conflict that would weaken the dollar’s safe-haven appeal.
Investor optimism over a swift cessation of hostilities has also lent some support to US Treasuries, which have taken a beating recently on inflation worries.
The two-year Treasury yield rose a touch to 3.76%. The 10-year yield traded flat at 4.56%, after dropping four basis points overnight. Yields fall when prices rise.
With the flow of oil still effectively cut off through the Strait of Hormuz, the International Monetary Fund on Tuesday lowered its growth outlook and warned that the global economy would teeter on the brink of recession if the conflict worsens.
Source: Theedgemalaysia