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World stocks extend global recovery

Atheer – External Sources

Asian shares gained on Monday, joining a global recovery for equity markets as sentiment improved gradually from a recent shakeout, sparked by fears of creeping inflation and higher borrowing costs.

Reuters reported that MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5 percent, having recovered more than forty percent of its losses from late January to last week’s low.

Trading was slower than usual, due to market holidays in the United States as well as Greater China.

Japan’s Nikkei gained 2.0 percent while US stock futures climbed 0.4 percent in Asia on Monday.

European shares are also rising, with spread-betters expecting advances of up to 0.8 percent in Germany’s Dax, 0.5 percent in France’s Cac and 0.2 percent in Britain’s FTSE.

MSCI’s index of stock markets across the globe gained 4.3 percent last week, the best weekly performance since December 2011.

The rebound came after a two-week rout that wiped off more than ten percent of value at one point, triggered by worries that a rise in US inflation may boost dollar funding costs.

The sell-off took place even as the corporate earning outlook improved on the back of strong global growth, bringing down equity valuations off highs hit earlier this year.

Just before the market ructions in late January, world shares were traded at 16.66 times their expected earnings, the highest levels since 2004, according to Thomson Reuters Datastream. They are currently at 15.33 times.

“The stocks’ valuation has become cheaper to levels that are on par with the assumption that long-term US bond yields will shoot up to 3.15-3.20 percent,” said Nobuhiko Kuramochi, chief strategist at Mizuho Securities.

In the currency market, the dollar stabilised off its three-year lows against a basket of currencies. The euro stood at $1.2426, backing down from Friday’s three-year high of $1.2556.

Elsewhere the dollar traded at 106.24 yen, bouncing back from its 15-month low of 105.545 set on the 16th of February.

The US currency has been weighed down by a barrage of factors, including worries about widening US trade and budget deficits and speculation that Washington might pursue a weak dollar strategy.

There is also talk that foreign central banks may be reallocating their reserves out of the dollar.

US West Texas Intermediate crude rose 0.65 percent in Monday Asian trade to $62.08 per barrel. Brent crude rose 0.3 percent to $65.05 per barrel.

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