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(Bloomberg) -- U.S. stocks shrugged off the government shutdown drama in Washington and rose to all-time highs following a report that regulators are close to further easing banking rules. Treasury yields reached the highest level in more than three years.
All major equity indexes gained, led by strength in apparel and durable goods makers. The dollar advanced but still posted a sixth straight weekly loss. And the yield on 10-year Treasuries climbed above 2.65 percent for the first time since June 2014.
“The outsized move (in Treasuries) continues to highlight market expectations of additional policy removal from the Fed -- and other central banks around the world -- coupled with a forecast of above-trend growth and inflation,” Lindsey Piegza, chief economist at Stifel Nicolaus & Co., wrote in an email. “While it’s difficult to push against the grain, we remain hesitant to drink the Kool-Aid just yet. Confidence will only support the market for so long in the absence of meaningful improvement in wage growth and top-line inflation.”
Meanwhile, traders seem didn’t seem to be taking the threat of a U.S. government shutdown too seriously.
“The market has been largely yawning at this,” Burns McKinney, chief investment officer for Allianz Global Investors based in Dallas, said on Bloomberg Television. “In the past year, they have disregarded all kinds of bad news. If you can shrug off geopolitical turmoil with North Korea, if you can shrug off Brexit, then really the government shutdown is by and large a softball. This is really something that’s not unprecedented. We’ve seen this before.”
The dollar’s weakness rippled through the market, with the yen, gold and precious metals among the beneficiaries. The risk-on mood that helped drive up Treasury yields this week was still evident, with European stocks following Asian peers higher. Emerging-market equities climbed for a sixth day, and West Texas crude extended its retreat.
Optimism about global growth finally seems to be catching up with bond markets, as investors factor in the prospect of accelerating price increases in the world’s largest economy. Better-than-expected growth numbers from China this week added to a slew of recent data releases from around the world supporting the positive outlook, days before two of the big central banks rule on rates.
Terminal users can read more in our markets blog.
Here’s what to watch out for next week:
- President Donald Trump joins world leaders and senior executives in Davos, Switzerland, for the annual World Economic Forum.
- Germany’s Social Democrats hold a convention on Sunday in Bonn to determine whether to pursue formal talks with Angela Merkel’s Christian Democratic Union-led bloc on forming a government.
- Central banks: Bank of Japan monetary policy decision and briefing on Jan. 23; European Central Bank rate decision on Jan. 25.
- U.K. Prime Minister Theresa May’s Brexit bill is set to be taken up in the House of Lords.
- Earnings season is in full swing: Netflix, UBS Group, Halliburton, Novartis, General Electric, Intel, LVMH Moet Hennessy Louis Vuitton, Starbucks, Hyundai Motor and Fanuc Corp. are among companies posting results next week.
- OPEC and partners, including Russia, will meet in Oman to review their strategy.
And these are the main moves in markets:
- The S&P 500 rose 0.4 percent to a record 2,810.31.
- The Stoxx Europe 600 Index jumped 0.5 percent to the highest in more than two years.
- The MSCI All Country World Index gained 0.5 percent to an all-time high.
- The MSCI Asia Pacific Index climbed 0.6 percent to the highest on record.
- The MSCI Emerging Market Index added 0.5 percent for its sixth consecutive advance.
- The Bloomberg Dollar Spot Index added 0.1 percent.
- The euro dropped 0.2 percent to $1.222.
- The British pound dipped 0.2 percent to $1.3863, its first decrease in more than a week.
- The Japanese yen increased 0.3 percent to 110.79 per dollar.
- The yield on 10-year Treasuries rose three basis points to 2.6518 percent, the highest since June 2014.
- Germany’s 10-year yield slipped less than one basis point to 0.568 percent.
- Britain’s 10-year yield gained one basis point to 1.337 percent.
- West Texas Intermediate crude sank 0.6 percent to $63.55 a barrel.
- Gold rose 0.4 percent to $1,331.92 an ounce, the biggest advance in a week.
--With assistance from Adam Haigh Natasha Doff and Samuel Potter
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