World shares up, dollar weakens, Bitcoin off record highs

World shares rose to just below record peaks on Tuesday after factory surveys boosted expectations of a recovery from the COVID-19 downturn, with drugmakers seeking fast approval for vaccines and authorities looking set to maintain stimulus.

Bets on more easing from the US Federal Reserve to help the pandemic-hit economy through the winter weighed on the dollar as riskier currencies rose, while crude prices struggled to join the bounce after oil-producing countries delayed a decision on output cuts.

The MSCI world equity index, which tracks shares in 49 countries, was up 0.4 per cent by 1323 GMT.

Breakthroughs in vaccine developments from top drugmakers Pfizer, Moderna and AstraZeneca in November along with a market-friendly outcome of the US presidential election helped the index score its best month on record, up 12 per cent to new all-time peaks.

“We believe the rally can continue, with the current pipeline of expected vaccine rollouts in line with our central scenario of widespread availability in the second quarter of 2021,” said Mark Haefele, Chief Investment Officer at UBS Global Wealth Management in Zurich.

“We also believe that a divided US government - which looks the most likely outcome - is no impediment to a rising market,” he added.

In Europe the pan-regional STOXX 600 benchmark was up 0.7 per cent, while US stock index futures also pointed to a strong start on Wall Street, with investors focusing on November manufacturing surveys from Europe and the United States.

Euro zone factory surveys were less upbeat than China’s as growth in the region cooled last month from a 32-month high on renewed lockdown measures. However, optimism did improve amid progress in developing COVID-19 vaccines.

In the UK, factories recorded their fastest growth in almost three years last month.

Earlier the MSCI’s broadest index of Asia-Pacific shares outside Japan closed up 1.3 per cent. China’s blue-chip CSI300 index rose 2.2 per cent after a business survey showed activity in China’s factory sector accelerated at the fastest pace in a decade in November.

Japan’s Nikkei closed near a 29-1/2-year high.

“What we are seeing today is that upward trend reasserting itself, given the positive news on the vaccine front, China’s growth picking up, and the tremendous faith in the ability of central banks to keep the markets afloat,” said Stephen Miller, market strategist for GSFM Funds Management.

Pfizer on Tuesday said it had asked for EU emergency authorisation of its vaccine, taking it closer to launch following a similar move in the United States last month.

Moderna applied for US authorisation on Monday after full results from a late-stage study showed it was 94.1 per cent effective with no serious safety concerns.

In foreign exchange markets, the dollar was under pressure after closing out on Monday its worst month since July with a little bounce, and as investors reckon on even more US monetary easing.

The dollar index was last down 0.2 per cent to 91.758.

In a speech released late on Monday, Fed chair Jerome Powell said a slowing recovery and a surging pandemic meant the US was entering a “challenging” few months, with the potential deployment of a vaccine still facing hurdles.

The Fed holds its next policy meeting later this month.

That lifted the euro close to a three-month high, up 0.4 per cent at $1.1974, while risk-related currencies such as the Canadian and Aussie dollar rose against the greenback.

Elsewhere sterling was up 0.5 per cent after hitting a three-month high as traders clung to hopes for a Brexit trade deal before the year’s end, despite the lack of tangible progress.

Bitcoin was volatile, last down 6 per cent after hitting a record high earlier in the day.

Bond markets were quieter. Germany’s 10-year bond yield nudged off three-week lows at -0.564 per cent, while southern European debt yields also edged up, though they held close to record lows ahead of next week’s European Central Bank meeting.

Data on Tuesday showing a bigger than expected drop in euro zone inflation in November didn’t move bond markets much but cemented expectations for the ECB to take action.

“The message is clear for the ECB. As this has been the base case for some time now, it will without a doubt make the ECB loosen policy once again,” said ING senior economist Bert Colijn in Amsterdam.

US 10-year yields were up slightly at 0.8602 per cent as the US Congress began a two-week sprint to secure funding and avoid a possible shutdown amid the coronavirus pandemic.