Higher Highs

Local markets may have been closed on Monday but the rest of the world kept up last week’s momentum, with most Asian shares at multi-month highs – with the exception of Japan which delivered some disappointing growth data.

In Europe, the Stoxx 600 hit an almost 2-month high, thanks mostly to outperformance in the healthcare sector after Belgian pharma group UCB won a favourable US court ruling. UCB surged 8% after a US court confirmed the validity of an important drug patent. William Hill brought up the rear in London after it rejected a takeover bid by Rank Group and 888 Holdings, saying the offer still “substantially” undervalues the company.

In the US, rising oil prices once again pushed all major stock indices to intraday record highs. Saudi Arabia’s statement that it’s prepared to take action to stabilize oil prices, sent oil bulls in a frenzy, much to the delight of the energy sector and stocks in general. The biggest contribution to the S&P and the NASDAQ however came from Apple which rose 0.6%. Valeant rose after a broker upgrade from “underperform” to “neutral”.

World yields kept falling – the yields on 10-year paper in the UK fell just shy of 50 basis points. Yields on most European sovereigns fell initially but rose back in later trading. US yields kept hovering at around 1.50% as expectations for further rate hikes in the US are still unclear. Employment data would suggest that Federal Reserve should act soon, but other indicators – read inflation – are not so comforting, especially when many are expecting a slowdown in growth for the current quarter. Odds are just below 50% for a rate hike in December.

Uncertainty over the future of the rate path in the US together with firmer prices in commodities saw the US dollar fall against most of its peers. The greenback was joined by the British pound as one of the worst performers of the day, leaving the Euro to pick up the gains amongst the majors. In exotics, the Mexican peso and the South African rand had a field day, both up over 1% against the US dollar.