Global shares rise along with dollar, bond yields turn higher

By Sinéad Carew and Samuel Indyk

NEW YORK LONDON (Reuters) -MSCI's global equities index rose on Friday while U.S. Treasury yields turned higher and the latest crop of economic data and upbeat earnings reports gave some support to riskier assets.

The U.S. dollar strengthened against the yen and clawed back some of Thursday's declines against major peers, while benchmark U.S. Treasury yields, after a three session decline, hit a two-week intraday low before swinging higher on the day.

Federal Reserve data on Friday showed U.S. manufacturing output increased 0.6% last month after an upwardly revised 0.4% rebound in November, likely as production picked up after a factory worker strike ended.

Elsewhere, data showed U.S. single-family homebuilding increasing to a 10-month high in December, indicating that construction activity regained some momentum at the end of the year, though rising mortgage rates and a glut of new homes on the market could constrain recovery.

All three of Wall Street's major indexes were set for gains for the day and for the week with the S&P 500 and the Dow eying their biggest weekly gain since early November.

"We've seen the 10-year yield drop over the course of the week ... It's been a major headwind for stocks this month, and so with that easing of yields even a little bit today, it's helping stocks grind higher," said Anthony Saglimbene, Ameriprise Chief Market Strategist.

Boosting stocks this week was a comment from Fed Governor Christopher Waller on Thursday that three or four rate cuts this year are still possible if U.S. economic data weakens.

Also, softer than forecast core inflation data on Wednesday pushed down the U.S. 10-year yield and supported stocks.

On top of the milder than expected inflation report Saglimbene also cited strong bank earnings reports and outlook for net interest income as well as benign credit trends.

"Investors today are feeling a little bit more confident than when they entered the week," he said, but cautioned that investors could see a lot of volatility ahead with Donald Trump due to be inaugurated as U.S. President on Monday Jan. 20.

"We'll see what happens next week. I wouldn't put a tonne of faith in this holding until tariffs and immigration policy are clearer."

On Wall Street, at 12:04 p.m. the Dow Jones Industrial Average rose 433.70 points, or 1.01%, to 43,587.45, the S&P 500 rose 66.57 points, or 1.12%, to 6,003.78 and the Nasdaq Composite rose 294.00 points, or 1.52%, to 19,631.65.

MSCI's gauge of stocks across the globe rose 7.04 points, or 0.83%, to 855.67 and Europe's STOXX 600 index rose 0.69%.

In U.S. Treasuries, yields erased losses after earlier falling to their lowest level in two weeks with some investors betting that strong economic data could mean the Federal Reserve won't cut interest rates as much as it indicated in December.

The yield on benchmark U.S. 10-year notes rose 1.1 basis points to 4.617%, from 4.606% late on Thursday. The 30-year bond yield rose 0.3 basis points to 4.8483% from 4.845% late on Thursday.

The 2-year note yield, which typically moves in step with Fed interest rate expectations, rose 3.6 basis points to 4.274%, from 4.238% late on Thursday.

In currencies the dollar index rose on the day but was on track for a weekly decline after a six-week winning streak, as investors awaited Trump's inauguration with hopes for more clarity on the next administration's policies.

The index, which measures the greenback against a basket of major currencies, rose 0.25% to 109.24.

The euro was down 0.11% at $1.0287 while against the Japanese yen, the dollar strengthened 0.73% to 156.26.

But the yen was higher for the week as comments from policymakers spurred bets for a quarter-point Bank of Japan rate hike next week. Sources told Reuters that the BOJ was likely to keep a hawkish policy pledge and raise rates next week.

Sterling weakened 0.53% to $1.2174 after worse than forecast British retail sales in December.

In commodities, oil prices moved lower on the day but eyeing a fourth consecutive weekly gain, as the latest U.S. sanctions on Russia fueled expectations for supply disruptions.

U.S. crude fell 0.46% to $78.32 a barrel and Brent fell to $81.22 per barrel, down 0.09% on the day.



Gold prices were barely higher but on track for a weekly gain as uncertainties around Trump's policies and renewed bets of further rate cuts had lifted it above the key $2,700 level.

Spot gold rose 0.02% to $2,713.89 an ounce.

Source: Investing.com