World stocks boast record-breaking month, led by Europe

SYDNEY: World shares were set to seal a record-busting month on Monday as the prospect of a vaccine-driven global economic recovery next year and yet more free money from central banks eclipsed concerns about the pandemic in the near-term.

The rush to risk has also benefited oil and industrial commodities while undermining the safe-haven dollar and gold.

"November looks set to be an awesome month for equity investors with Europe leading the charge at a country/regional level," said NAB analyst Rodrigo Catril.

Many European bourses are boasting their best month ever with France up 21per cent and Italy almost 26per cent. The MSCI measure of world stocks is up 13per cent for November so far, while the S&P 500 has climbed 11per cent to all-time peaks.

Early Monday, MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.1per cent, to be up more than 11per cent for the month in its best performance since late 2011.

Japan's Nikkei firmed 0.7per cent, bringing its gains for the month to 16.7per cent for the largest rise since 1990.

E-Mini futures for the S&P 500 edged up another 0.1per cent in early trade, and NASDAQ futures 0.4per cent.

"Markets are overbought and at risk of a short term pause," said Shane Oliver, head of investment strategy at AMP Capital.

"However, we are now in a seasonally strong time of year and investors are yet to fully discount the potential for a very strong recovery next year in growth and profits as stimulus combines with vaccines."

Cyclical recovery shares including resources, industrials and financials were likely to be relative outperformers, he added.

The surge in stocks has put some competitive pressure on safe-haven bonds but much of that has been cushioned by expectations of more asset buying by central banks.

Sweden's Riksbank surprised last week by expanding its bond purchase program and the European Central Bank is likely to follow in December.

DOLLAR IN DECLINE

Federal Reserve Chair Jerome Powell testifies to Congress on Tuesday amid speculation of further policy action at its next meeting in mid-December.

As a result U.S. 10-year yields are ending the month almost exactly where they started at 0.84per cent, a solid performance given the exuberance in equities.

The U.S. dollar has not been as lucky.

"The idea that a potential Treasury Secretary (Janet) Yellen and Fed chair Powell could work more closely to shape and coordinate super easy monetary policy and massive fiscal stimulus that could drive a rapid post pandemic recovery saw the dollar under pressure," said Robert Rennie, head of financial market strategy at Westpac.

Against a basket of currencies, the dollar index was pinned at 91.771 having shed 2.4per cent for the month to suffer its lowest close in two years on Friday.

The euro has caught a tailwind from the relative outperformance of European stocks and climbed 2.7per cent for the month so far to reach US$1.1964. A break of the September peak at US$1.2011 would open the way to a 2018 top at US$1.2555.

The dollar has even declined against the Japanese yen, a safe-haven of its own, losing 0.5per cent in November to reach 104.03 yen, though it remains well above key support at 103.16.

Sterling stood at US$1.3325, having climbed steadily this month to its highest since September, as investors wagered a Brexit deal would be brokered even as the deadline for talks loomed ever larger.

One major casualty of the rush to risk has been gold, which was near a five-month trough at US$1,789 an ounce having shed 4.7per cent so far in November.

Oil, in contrast, has benefited from the prospect of a demand revival should the vaccines allow travel and transport to resume next year.

Some profit-taking set in early Monday and pulled Brent crude futures back 53 cents to US$47.65, while U.S. crude eased 30 cents to US$45,23 a barrel.

(Editing by Lincoln Feast.)