Global shares approached record highs on Friday while the dollar and oil topped recent milestones, as progress in vaccine distribution and U.S. stimulus hopes prompted bets on further normalisation in the global economy.
An index of the world's major 50 markets, MSCI ACWI , rose 0.25% to 668.4, coming within reach of a record high of 670.82 touched about two weeks ago. It was the fifth consecutive day of gains.
Oil hit its highest level in a year, above $59 a barrel, supported by hopes of a quicker economic revival and supply curbs by OPEC and its allies.
The STOXX index of Europe's 600 largest stocks was up 0.2% at 410.4, though slower vaccination rollout in continental Europe and disappointing industrial data from Germany tempered optimism.
Expectations of a large stimulus by U.S. President Joe Biden also supported risk sentiment. Better-than-expected data on U.S. job markets released in the past two days fanned further hopes of a strong payroll report due at 1330 GMT.
"The fact that U.S. stocks are hitting record highs is not just thanks to the vaccine rollout, but also expectations of fiscal stimulus as it looks as though the Democrats will go on their own and not compromise with Republicans on a smaller package," said Philip Shaw, chief economist at Investec in London.
Longer-term U.S. Treasury yields rose in anticipation of a large pandemic relief bill from Washington as well as on heightening inflation expectations.
The benchmark 10-year yield stood at 1.130%, having risen to a three-week high of 1.162% the previous day. The 30-year bonds yielded 1.922%, near its 10 1/2-month high of 1.951% touched on Thursday.
Bond yields rose in Europe as well, with Germany's 30-year government bond yield climbing back into positive territory for the first time since September.
Germany's DAX index was flat after data showed orders for German-made goods fell more than expected in December.
MSCI's gauge of Asian shares outside Japan rose 0.4% while Japan's Nikkei rallied 1.5%.
A market gauge of future U.S. inflation was at its highest since October 2018. A similar gauge for the euro zone hit its highest since May 2019.
While it was a strong day for conventional assets, the leading names in the recent U.S. retail-share trading fad fared worse.
The "Reddit rally" stocks GameStop and AMC Entertainment plunged further after two weeks of wild swings fuelled by the WallStreetBets Reddit forum.
Deep-pocketed investors instead last week pumped a record $4.2 billion into big technology stocks, BofA's flow data showed, taking advantage of the slight pullback on Wall Street while retail traders ploughed into the Reddit favourites.
DOLLAR SMILE
The dollar headed for its best weekly gain in three months, lifted by growing confidence that the U.S. economic recovery will outpace global peers.
The U.S. currency's bounce confounded dollar bears and traced a trading pattern known as the "Dollar Smile", which in previous years has preceded major U.S. economic rebounds and currency surges.
The U.S. dollar index stood near a two-month high, having risen 1.1% so far this week, on course for its biggest weekly increase since late October.
"It seems markets are now trying to trade on economic normalisation based on progress in vaccination," said Arihiro Nagata, general manager of global investment at Sumitomo Mitsui Bank.
"The fact that the only currencies that are doing better than the dollar over the past two days are the British pound and the Israeli shekel, the two countries that are going further ahead in vaccination, seems to support that."
The British pound stood at $1.3696 not far from its two-and-a-half-year peak of $1.3759 hit late last month.
The shekel rose over the past two days, reversing its decline since mid-January after the Bank of Israel intervened to stem the currency's strength after it had hit a 24-year high.
Strength in the dollar pushed gold to a two-month low of $1,785.10 per ounce on Thursday. The metal was last traded at $1,797.40.
Oil prices extended gains on the upbeat economic mood, falling inventories and the OPEC+ decision to stick to its output cuts.
Brent crude was up 61 cents, or 1%, to $59.44 by 1045GMT, after hitting $59.67, its highest since Feb. 20, 2020. U.S. crude was up 57 cents, or 1%, to $56.78, after reaching $56.95, its highest since Jan. 22, 2020.
