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Equities enjoy more gains, US dollar dips

Simon JessopReuters
China Evergrande Group wired funds to a trustee account for a dollar bond interest payment.
Camera IconChina Evergrande Group wired funds to a trustee account for a dollar bond interest payment. Credit: EPA

A tech boost has helped tee global shares up for a third straight week of gains, despite growing inflation concerns, while the US dollar dipped and oil prices bounced off their lows.

MSCI's broadest gauge of global shares was up 0.1 per cent, 1.4 per cent higher on the week and just 0.8 per cent off its all-time high.

Europe's top markets were all up, with the biggest, Britain's FTSE 100, up 0.4 per cent.

That followed gains in Asia, where Japan's Nikkei advanced 0.3 per cent, led by the technology sector, and equity bulls were also comforted by news heavily indebted Chinese property firm Evergrande had made a surprise interest payment, averting a default for now.

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The risk-on tone came despite growing investor concern persistent inflation could force central bankers to tighten monetary policy at a point where global economic growth remains fragile.

Data on Friday showed euro zone inflation expectations are at their highest in years, amid a rash of warnings from companies including Nestle, ABB and Unilever .

The German 10-year break-even inflation rate, which represents the difference in yield between a nominal bond and its inflation-indexed counterpart, rose to around 1.81 per cent, its highest since April 2013.

Rising prices crimped euro zone growth in October and could set the scene for a tough meeting of the European Central Bank next week, Neil Birrell, chief investment officer at asset manager Premier Miton, said.

"The ECB meets next week, it has plenty to discuss, a faltering economy and rising inflation; it is under pressure to tackle the inflation spike but needs to tread carefully with any change in policy," he said.

Despite concern inflation pressures could push governments to tighten monetary policy too quickly, Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a note to clients that equities could still move higher.

"With current issues still appearing more temporary than structural, we believe equity markets will continue to move higher," Haefele said.

"Indeed, small increases in inflation expectations can be positive for markets if it helps to banish fears of deflation. Furthermore, by our assessment, global growth remains strong, supply chain challenges should recede into 2022, and corporate earnings should continue to grow."

US stock futures point to a flat open on Wall Street, after the cash index posted a record closing high overnight, led by surging tech shares.

Next week, Facebook, Apple, Amazon, and Google-owner Alphabet all report, with bulls hoping they can follow forecast-beating earnings this week from Netflix.

Meanwhile, yields on benchmark 10-year Treasury notes were at 1.6908 per cent, easing back from a five-month high of 1.7050 per cent reached overnight.

The US dollar index, which gauges the greenback against six major rivals, was down 0.1 per cent to 93.634, despite initially bouncing off recent lows after US jobless claims fell to a 19-month low, pointing to a tighter labour market.

The Federal Reserve has signalled it could start to taper stimulus as soon as next month, with rate hikes to follow late next year. Full employment is among the Fed's stated requirements for rates lift-off.

Across commodities, oil prices bounced off their overnight lows, up 0.3 per cent, with Brent crude and West Texas Intermediate just about in the black for the week and earlier threatening to break a multi-week winning run.

Gold was up 0.4 per cent on the back of the weaker US dollar, on course for its second week of gains.

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