Equity investors rate the best month ever

LONDON / SYDNEY (Reuters) – World equities stalled Monday to value a record month as the prospect of a vaccine-led economic recovery next year and even more free money from central banks eclipsed immediate concerns about the pandemic. coronavirus.

Helping sentiment was a survey showing that factory activity in China easily beat the forecast in November, and the country’s central bank surprised with the help of cheap loans.

Chinese blue chips closed lower, but were up nearly 6% for the month, and although European traders were reluctant to raise their bumper November, that wouldn’t have detracted from a record 15% month.

The risk run has also benefited oil and industrial commodities, while undermining the dollar and gold.

“It’s been a very, very strong month for the markets, especially on the equity side but also on the fixed income side,” said Elwin de Groot, head of macro strategy at Rabobank.

Positive developments on vaccines and the speed with which they are likely to be launched were key factors.

“And this market is still very much supported by central bank liquidity,” De Groot added. With the ECB poised to provide more stimulus next month “the market view appears to be, what can go wrong?”

Many European exchanges are boasting their best month ever with France up 21% and Italy up nearly 26%. The MSCI global equities index rose nearly 13% in November, while the S&P 500 rose 11% to all-time highs.

The broader MSCI index of Asia Pacific equities outside of Japan closed 1.5% lower on the day but was still up nearly 10% over the month.

Japan’s Nikkei 225 was down 0.8%, but was still 15% higher in the month for the largest rise since 1994. E-Mini futures for the Wall Street S&P 500 fell 0.4%

“The markets are overbought and risk a short-term hiatus,” said Shane Oliver, head of investment strategy at AMP Capital.

“However, we are now in a seasonally strong time of year and investors have yet to fully discount the potential for a strong recovery in growth and profits next year as the stimulus combines with vaccines.”

Cyclical recovery stocks, including resources, industrials and financials, would likely have outperformed relatively, he added.

The rally in equities put competitive pressure on safe haven bonds, but much of that was tempered by expectations of higher asset purchases by central banks.

Sweden’s Riksbank surprised last week by expanding its bond buying program and the European Central Bank is likely to follow in December.

The 10-year German Bund yield fell 1.1 basis points to -0.598%, the lowest since 9 November. The rest of the main market also fell by around 1 basis point.

(Chart: Global Markets Have a November to Remember)

DOLLAR DECLINE

Federal Reserve Chairman Jerome Powell will testify to Congress on Tuesday amid speculation about further political action at the next meeting in mid-December.

As a result, US 10-year yields are ending the month almost exactly where they started at 0.84%, a solid performance given the exuberance of stocks.

The US dollar was not so lucky.

“The idea that a potential Treasury Secretary (Janet) Yellen and Fed Chairman Powell could work more closely to shape and coordinate a super-easy monetary policy and massive fiscal stimulus that could drive a rapid post-pandemic recovery saw the dollar under pressure, ”said Robert Rennie, head of financial market strategy at Westpac.

Against a basket of currencies, the dollar index was stuck at 91.771 after losing 2.4% for the month at its lows last seen in mid-2018.

The euro took a breeze from the relative outperformance of European equities and rose 2.7% over the month to reach $ 1.1967. A break of the September peak at $ 1.2011 would pave the way for a 2018 high of $ 1.2555.

The dollar even declined against the safe-haven Japanese yen, losing 0.7% in November to hit 103.89 yen, although it remains well above the key support at 103.16.

The pound traded at $ 1.3334, having steadily climbed this month to its highest since September as investors bet a Brexit deal would be brokered even as the deadline for talks loomed ever larger.

A major casualty of the risk run was gold, which was close to a five-month low at $ 1,771 an ounce after losing 5.6% in November.

Oil, on the other hand, benefited nearly 30% from the prospect of a revival in demand if vaccines allow travel and transport to resume next year.

Some profit-taking was set early Monday before an OPEC + meeting to decide whether the producer group will extend large production cuts. Brent crude futures fell 52 cents to $ 47.66, while US crude fell 60 cents to $ 44.93 a barrel.

(Chart: November Emerging Market Equities to Remember)