China bulls keep stocks near record high

LONDON (Reuters) – Strong data from China kept world shares near a record high on Monday, sent copper to a 4-1/2 month peak while emerging market stocks have achieved a near a five percent gain over the last five days.

Figures from Beijing showed China’s economy grew at a faster-than-forecast 6.9 percent year-on-year in the second quarter thanks to a pick-up in industrial output and domestic consumption and as investment remained strong.

Wall Street, which had closed on Friday with the S&P 500 and Dow Jones Industrial at all time highs, was expected to start the week little changed and be dominated by a blizzard of company earnings releases.

Asia shares .MIAPJ0000PUS had hit a 2-year high overnight and Europe’s bourses <0#.INDEXE> managed a 0.1 percent rise as they looked to score their fourth session of unbroken gains.

The jump in copper and other industrial metals [MET/L], as well as higher oil prices following the Chinese data, meant mining firms .SXPP led the charge (AAL.L) (NHY.OL) (GLEN.L) though most sectors also shuffled higher.

“The China data was very helpful,” fund manager UBP’s macro and FX strategist Koon Chow said.

“I think it had a particular resonance after Friday’s (weaker than expected) U.S. CPI and retail sales data … so it is extending the Goldilocks environment,” he said referring to a not-too-hot, not-too-cold market climate.

That lacklustre U.S. data meant the dollar .DXY was struggling to rise above a 10-month low in early European trading [FRX/] having watched commodity-based — and therefore China-linked — Australian and Canadian dollars jet higher overnight.

The Aussie dollar AUD=D3 hit its highest level in over two years before it pulled back to $0.7823, while the Canadian dollar CAD= touched a one-year high before it settling at around C$1.2655.

Britain’s Sterling GBP=D3 and the euro EUR=EBS both eased against the dollar having jumped on Friday and as officials from both sides went into Brexit talks in Brussels. The euro was worth 87.71 pence EURGBP=D3.

Britain’s Brexit Secretary David Davis is in the Belgian capital for talks with the European Union’s chief negotiator Michel Barnier a month after a first meeting. Davis said on Monday that having “made a good start” during their last encounter, “this week we’ll be getting into the real substance.”

Working groups will focus on three areas: citizens’ rights- the EU demand that Britain pays some 60 billion euros ($69 billion) to cover ongoing EU budget commitments- and other loose ends, such as what happens to British goods in EU shops on Brexit Day.

“It seems that the British government wants to (take) major steps towards the EU in the upcoming round of negotiations … It has for example admitted by now that it would meet its financial obligations towards the EU — an auspicious beginning,” wrote Commerzbank analysts in a note to clients.

Copper Shines

Emerging market stocks continued their blistering run following the upbeat Chinese data, with MSCI’s widely tracked 24-country EM index up for a sixth day during which it has surged almost 5 percent.

It took the index to a more than 2-year high too and Morgan Stanley said EM assets had now “passed the recent test of higher volatility with a high level of resilience.”

“Our conviction to stay bullish on EM local rates, FX and sovereign credit remains unwavering,” its analysts said.

In commodities, oil also inched higher, consolidating gains made last week on signs of lower U.S. inventories and stronger demand.

U.S. crude CLc1 steadied at $46.47 a barrel, while global benchmark Brent LCOc1 was at $48.90.

Gold XAU= gained too, rising to $1,231 an ounce in London, though it was copper that shone brightest of the metals, climbing CMCU3 1 percent to $5,983.50 a tonne, having earlier struck its highest since March 2.

Shanghai Futures Exchange copper SCFcv1 rose 1.4 percent to 47,810 yuan ($7,060) a tonne and another heavily used industrial metal, zinc CMZN3, jumped almost 2 percent.

“I’m still bullish on copper. The property backdrop is still good- China economy and industrial production numbers are still good. Orders are coming through from state grid,” analyst Dan Morgan at UBS in Sydney said.

In the bond markets, U.S. 10-year Treasury yields US10YT=RR, which fell to as low as 2.279 on Friday, were steady at 2.31 percent as the dollar drifted to 112.445 yen JPY=D4.

Euro zone government bonds also barely budged, biding their time ahead of this week’s European Central Bank meeting for the latest signals on how the central bank plans to scale back its ultra-loose monetary policy.

Germany’s benchmark 10-year bond yield DE10YT=TWEB was at 0.51 percent – down from 18-month highs of 0.58 percent hit a week ago.

The Bank of Japan too is expected to keep its ultra accommodative policy unchanged when it meets on Wednesday and Thursday.