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Hopes for additional monetary stimulus to struggling economies helped support investor sentiment and sent most global stocks higher while demand for top-tier government bonds fell.
Data in the US showed an unexpected decline in weekly jobless claims, which helped offset in part a string of lacklustre economic indicators in Europe this week.
Paul Dales, a senior US economist at Capital Economics, said the fall in US initial jobless claims last week “suggests that [US] labour market conditions are fairly stable”.
Also on the data front, a report yesterday showed that the annual rate of factory output in China slowed to 9.2 per cent in July, lower than forecast and the weakest in more than three years.
But hopes for fresh stimulus measures from Beijing were given a boost as China’s inflation also slowed for a fourth month, which may free the People’s Bank of China to ease monetary policy aggressively.
The response among regional stocks in Asia was positive with the Shanghai Composite climbing 0.6 per cent and Hong Kong’s Hang Seng adding 1 per cent.
“The slightly weaker economic data [in China] had a positive effect on asset prices given expectations for further easing,” analysts at Brown Brothers Harriman noted.
Stocks also rose in Europe, where the world’s largest food company, Nestlé, posted sales growth that beat estimates.
The FTSE Eurofirst 300 index gained 0.5 per cent and the FTSE All-World equity index rose 0.1 per cent to touch a three-month high.
On Wall Street, the benchmark S&P 500 index reversed earlier gains and was slightly lower but still managed to maintain the 1,400 level.
Global stocks have risen about 8 per cent since the start of June and are up more than 3 per cent in just the past five sessions.
As demand for equities remained supported, investors sold US Treasuries and German Bunds.
The yield on the 10-year Treasury note climbed 4 basis points to 1.72 per cent, a fresh two-month high, while the yield on equivalent German Bunds rose 5bp to 1.45 per cent.
The US Treasury concluded the third leg of its quarterly refunding programme with the sale of $16bn in 30-year bonds. An auction of US 10-year notes on Wednesday was met with tepid demand.
Pressure on the eurozone “peripheral” debt sector also eased, contributing to the global rally.
Spanish 10-year yields dipped 2bp to 6.84 per cent and Italian equivalents fell 8bp to 5.81 per cent.
In spite of the better tone on markets, the euro resumed declines and by midday in New York was trading 0.6 per cent lower at $1.2288.
The Australian dollar and other growth-sensitive currencies were buoyed, with the Aussie moving closer to $1.06 for the first time since mid-March.
But the Japanese yen fell as the Bank of Japan left monetary policy unchanged, as forecast.
“US economic data was relatively firm in tone while another factor helping the greenback today are higher US Treasury yields,” said Vassili Serebriakov, a currency strategist at Wells Fargo.
“Higher US yields appear to be particularly relevant for the yen, which remains sensitive to relative US-Japan rate differentials,” he added
On commodities markets, copper, which is considered a gauge of future industrial activity, rose 0.3 per cent to $3.43 a pound.
Oil prices also got a boost, with Brent prices rising for a fifth session. Brent crude added 30 cents to $112.44 a barrel.
Gold also rose, the precious metal trading 0.2 per cent higher at $1,613.80 an ounce.