Global stocks reach new all-time high as Covid recovery hopes rise

Global shares hit a new record high on Wednesday, with sentiment boosted by optimism about the latest data on the efficacy of Covid-19 vaccines.

The FTSE World index gained 0.3 per cent to set a new all-time high, driven by gains in Asia. China’s CSI 300 rose 2.1 per cent, taking its gain for the week to almost 6 per cent — which, if sustained, would be the benchmark’s best week since July 2020.

In Europe, the regional Stoxx 600 benchmark crept 0.2 per cent higher in early trading, while the UK’s FTSE 100 rose a similar amount.

“The recovery and reopening narrative is so strong,” said Kasper Elmgreen, head of equities at European fund manager Amundi. “It is very hard to beat down.”

Stocks were lifted by official UK data, first reported in The Sun newspaper, that Pfizer’s coronavirus vaccine offered two-thirds protection after the first shot.

“These results will make a huge impact if confirmed and sustained,” commented Deutsche Bank investment strategist Jim Reid.

Oil markets were steady at $61 at barrel, holding at their highest levels since the early weeks of the pandemic.

In the US, President Joe Biden’s $1.9tn stimulus package is still being debated in Congress. The size of the spending programme has prompted Wall Street analysts to beef up their forecasts for economic growth. But it has also prompted concerns that a related lift in inflation might force the US central bank to dial back stimulus measures that have supported financial markets during the pandemic.

Investors will look for clues on how the Federal Reserve plans to respond to brighter economic prospects when its chairman Jay Powell speaks later on Wednesday, at the Economic Club of New York, about the state of the US labour market.

Yields on US government bonds, which have sold off steadily in recent weeks as inflation expectations have risen, were steady on Wednesday morning in London. The 10-year Treasury yield stood at just under 1.16 per cent.

Because inflation erodes the value of bonds’ income payments, faster price rises makes these investments less attractive and could drive a “great rotation” into equities, Elmgreen said.

But others argued that the rally in global stock markets since March was supported by ultra-low interest rates and bond yields, so a tightening of monetary policy could sap this momentum.