Shares and industrial commodities took off on Friday night, spurring the S&P500 index to yet another record high. The gains for risk assets followed slightly softer than expected European and US economic data, that may have eased inflation worries and concerns around higher interest rates.
Crude oil markets rose 4% and copper and aluminium gained around 2% as traders resumed their optimism about the economic outlook. The sentiment swing appeared to defy European gloom to focus on higher vaccine distribution rates in the US. Naturally commodity currencies followed the shift, trading higher as the safe haven appeal of the US dollar and Japanese yen faded.
The new highs for US stocks are based on broad sectoral support. Energy and Materials stocks rose with their underlying commodities and the anticipation of better growth prospects. Interest rate sensitive sectors also lifted. High growth technology stocks and real estate shares rose, despite a modest lift in bond yields. These impulses are contradictory, but there is no disputing the momentum evident on Friday night.
The positive sentiment should lift regional shares today. Reports of margin calls locally and in the US may weigh on enthusiasm, as may this week’s month and quarter end. The week brings more activity related PMI reads, and important inflation releases. Traders may focus on China PMIs as a measure of economic expansion, and Friday’s US non-farm payrolls to indicate the level of recover so far.