Stocks stay near record highs; focus on central banks, earnings

World stocks traded just below record highs on Monday, pausing ahead of this week’s central bank meetings, economic data and earnings, while oil prices rose to their highest in over a week after blockades began shutting down two Libyan oilfields. European equity markets were lower, while US stock futures dipped, with trading subdued on the Martin Luther King Jr. holiday in the United States.

Still, MSCI’s s all-country index is up almost 2.5% for the first three weeks of the year, as an easing in US-China trade tensions and signs that the worst may be over for the world economy bolster sentiment. The S&P 500 − a broad gauge of US shares − has gained just over 3% and the tech-heavy Nasdaq almost 5%.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.25% on Monday after rising to its highest since June 2018. Japan’s Nikkei gained 0.2% to near its highest in 15 months.

In China, the blue-chip CSI300 index rose 0.7%. The yuan rose to a six-month high. US corporate earnings this week include Netflix, Intel Corp and Texas Instruments, while the European Central Bank, Bank of Canada and Bank of Japan hold policy meetings. “Optimism is high, mainly, though, because we appear to have clicked back to a world of growth enthusiasm,” said Chris Bailey, European Strategist at Raymond James in London. “The upcoming earnings season is going to be fascinating... Netflix and Intel on Tuesday and Thursday in the US are going to be insightful re the tech sector, whilst UBS tomorrow, ASML on Wednesday and Ericsson Friday will be helpful on perceptions towards Europe.”

The Bank of Japan meets on Tuesday, while the ECB is expected to open a key strategic policy review when it meets on Thursday.

Friday brings the release of key business activity data, while the World Economic Forum in Davos is also in focus, with US President Donald Trump expected to discuss trade disputes with European Commission President Ursula von der Leyen. Oil prices rose to their highest in more than a week after two large oil fields in Libya began shutting down after forces loyal to Khalifa Haftar closed a pipeline.

Brent crude futures were last up 0.7% at $65.31 a barrel. US crude jumped 0.6% to $59.

The dollar rose to its strongest level of 2020 after last week’s run of data confirmed that the US economy is holding up well.

Figures on Friday showed US homebuilding surged to a 13-year high in December and a gauge of manufacturing activity rebounded to its highest in eight months.

The dollar edged up 0.1% against a basket of currencies, with the index rising as high as 97.727, its strongest since Dec. 24. The euro was down at $1.1085.

“In 2020, we don’t expect the pace of growth to slow as much as it did last year,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

“Accommodative policy and the reduction of downside risk following the signing of the Phase 1 US-China trade deal will help support the economy and risk assets.” Sterling came under some selling pressure after British finance minister Sajid Javid stoked fears about weak ties with the European Union following Britain’s departure from the bloc.

Elsewhere, gold gained to around $1,560 an ounce, after reaching a seven-year high earlier this month at the height of Iran-U.S. tensions.

Gold hit a more than one-week high on Monday as investors hedged against lingering tensions in the Middle East and an impeachment trial in Washington, while deficit-hit palladium’s record run showed no signs of abating.

Spot gold was up 0.3% at $1,560.21 per ounce by 1120 GMT, after touching its highest since Jan. 10 at $1,562.51 earlier in the session. US gold futures were flat at $1,560.30.

“Investors are flocking towards gold in spite of a spike in equity markets mostly because of long-term uncertainties like political insecurity, probable equity market volatility in future, weak-earnings expectations and ultra-low interest rates,” Commerzbank analyst Eugen Weinberg said.

Investors are pouring money into gold exchange traded funds (ETF) and central banks are buying the metal at record rates, Weinberg added.

Holdings of the world’s largest gold-backed ETF SPDR Gold Trust rose 2.20% to 898.82 tonnes on Friday, the highest since Nov. 11.

Investors kept a close eye on developments in the Middle East, after Iran-aligned Houthis attacked a military training camp in Yemen on Saturday.

Also on the radar was the shutdown of oil facilities in Libya amid a military blockade, and heightened tensions between the US and Iran.

In Washington, President Donald Trump will offer his first comprehensive defense on Monday before his impeachment trial in the Senate.

World stocks meanwhile held near record highs, while the dollar rose as a host of positive economic data pointed towards a strengthening economy.

Trading volumes were low with US markets closed for a holiday.

“The rebound of gold despite the strength of the greenback is confirming investors’ strong appetite for bullion,” Carlo Alberto De Casa, Chief analyst at ActivTrades said in a note.

Agencies