Global stocks rise to record high as economic optimism returns, while oil surges after OPEC+ forecasts growing demand
Global stocks rose to a record high on Tuesday as US equity futures climbed after investors rediscovered their optimism over the economic recovery from coronavirus after a volatile May.
Meanwhile, oil prices jumped after the OPEC+ group of producing countries forecast a tightening market ahead of an important supply decision on Tuesday.
Futures for the US benchmark S&P 500 index climbed 0.3%, Nasdaq 100 futures rose 0.23% and Dow Jones futures were 0.42% higher as US and UK trading reopened after public holidays.
The MSCI All-World index rose 0.26% to a new high, as stocks opened higher in Europe and Asian equities broadly climbed overnight.
The OECD – an international organization that promotes growth and trade – on Monday revised up its growth forecast for the global economy in 2021 to 5.8%, from its March forecast of 5.6%.
“Never in a crisis has policy support – be it health, with the record speed of vaccine development, monetary, fiscal or financial – been so swift and effective,” OECD chief economist Laurence Boone said in an introduction to the organization’s report.
“As a result, the manufacturing sector is growing rapidly, merchandise trade is rebounding strongly, as borders gradually reopen and travel is slowly resuming.” Boone warned the global recovery will be highly uneven, and the pandemic will hit some countries’ living standards hard.
Investors’ focus is set to remain on economic data releases that should give a sense of the strength and sustainability of the recovery. They are particularly nervous about rises in inflation that could weigh on assets’ returns, or force central banks to cut back on support for economies.
The key release will be the official US nonfarm payrolls data due at the end of the week, which will show how the jobs market fared in May after a very disappointing April.
“As the [European Central Bank and Fed prepare for their crucial June/July meetings, they will have to weigh the cross-currents of robust price pressures, surging confidence, mixed labour markets and remaining uncertainties about COVID variants,” said Barclays analysts Christian Keller and Akash Utsav in a note. “The attention on incoming data will, thus, remain high.”
In commodities markets, forecasts released by the OPEC group of oil-producing countries caused prices to soar. OPEC’s joint technical committee said it reckons stockpiles of oil will fall by at least 2 million barrels a day from September through December, Bloomberg reported.
Brent crude oil – the global benchmark price – rose 2.24% on Tuesday morning to $70.84. WTI crude rose 2.96% to $68.28.
Later on Tuesday the OPEC+ group is set to meet to discuss whether to go ahead with a planned output increase over June and July.
Warren Patterson, head of commodities strategy at Dutch bank ING, said: “We believe that the market will be able to absorb this additional supply, and so would expect the group to confirm that they will increase output as planned.”
Elsewhere, the British pound rose to a three-year high of $1.425, before slipping back, as investors cheered the country’s rapid vaccine rollout.
The dollar index slipped 0.19% to 89.96. The yield on the key 10-year US Treasury note rose 2.5 basis points to 1.618%. Yields move inversely to prices.