US stocks were on track to rise to new all-time highs on Friday at the end of a stellar week in which the S&P 500 has already risen around 4% and is heading for its strongest weekly gain in three months.
Signs that the US and other economies are recovering from the latest round of coronavirus restrictions have also boosted oil prices to one-year highs, as the demand outlook brightens.
After the index climbed more than 1% on Thursday, S&P 500 futures inched 0.28% higher on Friday. Dow Jones futures rose 0.29% while Nasdaq futures climbed 0.22%.
China’s CSI 300 rose 0.17% overnight, finishing the week in the green, as the strong economic recovery outweighed worries over rising short-term credit costs. Japan’s Nikkei 225 jumped 1.54% on upbeat earnings and stimulus hopes.
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The Europe-wide Stoxx 600 index rose 0.42% in early trading, while the UK’s FTSE 100 climbed 0.11%.
Investors have been pulled in different directions in recent weeks. Hopes that vaccines and stimulus will power a strong recovery in 2021 have clashed with short-term economic pain and a day-trading frenzy that shook markets at the end of January.
But better-than-expected economic data from the US has sparked new optimism that the recovery will be a powerful one.
Figures released yesterday showed that new US unemployment claims fell for the third week in a row last week – to 779,000 – and factory orders rose more than expected in December.
The Bank of England on Thursday cut its short-term growth forecasts thanks to January’s lockdown. But it said the country’s speedy coronavirus vaccine rollout “should help the UK economy recover rapidly later this year.”
Adding to the general mood of optimism, Democrats in Congress are powering ahead with plans to pass a $1.9 trillion stimulus package without Republican approval.
Investors’ attention on Friday will be on the official US employment report, due at 8.30am ET. Economists at Daiwa expect a modest 50,000 increase in payrolls, following a 140,000 decline in December. Yet they said in a note that recent data suggests the figure could be better than expected.
Oil prices have soared this week as the economic outlook has brightened, with investors betting demand will be higher in the future. Brent crude was up 1.12% on Friday morning to $59.66 a barrel, its highest level since February 2020. Brent has gained more than 7% so far this week, its largest weekly increase in a month. WTI crude was 1.42% higher at $57.03 a barrel.
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Jeffrey Halley, senior market analyst at currency firm Oanda, said: “With inflation sentiment rising in the US, partially due to higher government borrowing, adding a tailwind to the economic recovery, the conditions still remain supportive for oil markets.”
The dollar index slipped back from its highest level since December. It was last down 0.16% to 91.39.
A strong pound, after the Bank of England suggested negative interest rates were not likely any time soon, added to greenback weakness. The pound was up 0.21% to $1.37 on Friday after jumping on Thursday.
US bond yields were little changed. The yield on the 10-year Treasury note was roughly flat at 1.139% but continued to trade at around its highest level since March 2020, reflecting stronger growth and inflation expectations. Yields move inversely to bond prices.