Stocks on track for first weekly gain in three, commodities soar

World stocks headed for their first weekly gain in three amid a surge in commodity prices, while traders braced for a U.S. jobs report later on Friday that could provide clues on when the Federal Reserve will ease back on monetary stimulus.

European stocks opened higher, with the pan-European STOXX 600 index hitting a record as strong data from Germany and other major economies added to hopes of a swift recovery from the pandemic shock. (EU)

By midday in London, German DAX rose 1.3%, inching closer to its life high, while France’s CAC 40 hit its highest since November 2000 and Britain’s FTSE 100 breached the 7,100 mark, up 0.7% on the day.

MSCI’s benchmark for global equity markets, which tracks stocks in 50 countries, edged up about 0.2%, on course for a 0.5% gain this week.

Its broadest index of Asia-Pacific shares outside Japan rose about 0.4% on Friday, while Japan’s Nikkei gained about 0.2%.

China’s blue chips closed 1.3% lower on the day, despite data on Friday showing an unexpected pick-up in the nation’s export growth.

Aluminium prices approached levels last seen in 2018 and copper hit an all-time high as investors bet on a rapid global recovery from the pandemic, led by the United States. [MET/L]

Iron ore futures vaulted to a record high on Friday, while crude oil rose.

On Thursday, Wall Street investors piled into economically-sensitive stocks on the reflation trade, driving the Dow Jones Industrial Average to a record close on Thursday.

The Dow rose 0.9%, the S&P 500 gained 0.8% and the Nasdaq Composite added 0.4%.

S&P futures pointed to further gains, edging 0.3% higher on Friday.

“We remain positive that the reopening of the global economy will continue, supporting a broadening of growth,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “That will favour cyclical sectors, such as energy and financials.”

Financials and industrials led Thursday’s rally in U.S. shares after a report showed the number of Americans filing new claims for unemployment benefits fell below 500,000 last week for the first since the COVID-19 pandemic started, signalling the labour market recovery entered a new phase amid a booming economy.

The Russell 1000 Value index gained 0.8%, outpacing the Russell 1000 Growth index, which rose 0.5%.

The focus now shifts to Friday’s non-farm payrolls report due at 1230 GMT, with estimates ranging widely between 700,000 and more than 2 million jobs having been created in April.

So far, Fed Chair Jerome Powell has said the labour market is far short of where it needs to be to start talking of tapering asset purchases. The central bank has said it will not raise its benchmark Fed funds rate through 2023.

“We ultimately expect the Fed to maintain its credibility, and not need to prematurely normalize policy in reaction to a burst in realized and expected inflation this year,” strategists at BCA Research said in a daily note.

“Meanwhile, the improving growth outlook and guidance ahead of tapering will eventually nudge yields higher. Thus, we favour short-duration, value stocks and procyclical equity sectors in anticipation of higher yields over a 12-month horizon.”

The safe-haven dollar sank to its lowest level in a week against a basket of major peers on Friday ahead of the jobs report, as firmness in global stock markets boosted risk appetite.

The dollar index dipped to 90.746, and was on track for a 0.4% decline this week.

Treasury yields hovered near the lowest level this month on Friday, further removing support for the greenback, after bond traders largely shrugged off the better-than-expected initial jobless claims data and waited for the non-farm payrolls report to provide market direction.

The 10-year Treasury note yielded 1.5771% in European trade.

Gold headed for a 2.5% weekly gain, the most since December, as the weaker dollar and easing Treasury yields propelled the precious metal, an inflation hedge, above the psychological $1,800-an-ounce level to last trade at around $1,818.