GLOBAL MARKETS-Shares near 5-yr high as central bank rally rolls on

Tue May 7, 2013 9:25am EDT

* MSCI world share index at highest since June 2008, Dax at
record high
    * German data lifts euro, pressure remains from ECB rate cut
threat
    * Reserve Bank of Australian cuts interest rates to record
low
    * Aussie dollar falls, stocks trim earlier losses on RBA
decision

    By Marc Jones
    LONDON, May 7 (Reuters) - World shares hit their strongest
in almost five years and Germany's Dax reached an all-time high
on Tuesday, as signals top central banks will remain supportive
of growth continued to drive markets.
    Wall Street, which has climbed over 13 percent this year,
was also eyeing another record day for the S&P 500, with futures
 pointing to opening gains of around 0.2 percent.    
   
    MSCI's global index, which tracks stocks in
45 countries, had edged past its June 2008 peak after Japan's
Nikkei, which was closed on Monday, jumped in a delayed reaction
to Friday's U.S. jobs data.
    Momentum then continued in Europe, with the DAX 
 hitting a record as German industrial data and corporate
earnings proved unexpectedly strong.
  
    With key economies like the United States seeing a patchy
recovery but others struggling to maintain growth, major central
banks around the world have shown over the last few weeks they
intend to keep stimulus flowing freely for the time being.
    On Monday, European Central Bank chief Mario Draghi said it
was ready to trim rates again if needed, while Australia's
central bank cut rates to a new low of 2.75 percent on Tuesday
and suggested it may do more. 
    "I think the markets are going to continue going higher,"
said Neil Marsh, strategist at Newedge.
    "From a very low base, everyone is fairly optimistic that
things are going to improve and if they don't, you've got the
added backdrop from Draghi that he'll do whatever it takes to
push the euro zone economy forwards."
  
  
    YEAR OF NONSENSE
    Draghi's comments, including that the ECB might push its
deposit rate into negative territory, kept the euro under
pressure although the surprise rise in German industrial orders
pushed it back above $1.31 against a softer dollar.
    While it would ease monetary policy, negative rates would be
a risk for the ECB as they would effectively push banks to spend
any spare cash rather than parking it at the central bank.
    The view that banks will choose to accept the risks of
buying Italian and Spanish bonds
rather than lose money leaving it at the ECB trimmed yields for
both countries. Portugal sold its first 10-year bond since being
bailed out in 2011, while safe-haven German Bunds lost ground.
  
    "This year is a year where all market behaviour is basically
nonsense ... In an environment where you have the central banks
pushing down all yield levels on whatever is supposed to be a
fixed-income investment, this is really changing the game," said
Didier Duret, Chief Investment Officer at ABN Amro.
    "I think there is a plot to inflate from the central banks
and this is still unfolding, so we are in the paradigm where the
central banks' actions are still the fuel for markets. For now I
don't see any reason to worry (about equity markets falling)."  
    
    RATE CUT HITS AUSSIE DOLLAR
    The Australian dollar sank to a two-month low of
$1.0157 after the central bank trimmed rates by 25 basis points,
also helping Australian shares limit losses. Markets had
priced in a 50-50 chance of a cut. 
    April data from China, the world's second-largest economy,
due over the next week - including trade, inflation, and money
supply and loan growth - should give more clues on the prospects
for global growth. 
    Many industrial commodities have risen on expectations the
giant U.S. economy will lead a recovery although worries about
demand from top consumers such as China are tempering gains. 
    Three-month copper was up 0.2 percent at $7,281 a tonne
 after hitting a three-week high of $7,374 earlier. The
metal is up about 7 percent since Friday, although it remains
around 5 percent below its April peak.
    Shanghai steel futures hit a near one-week high early on
Tuesday but remain near their lowest for five months. 
    Crude oil prices fought off early weakness to push back
towards $106 a barrel as profit-taking wore off
following a spike on Monday as Middle East tensions escalated. 
    "There's a risk premium pull-back today, but more generally 
there's a glow of comfort for investors, with central banks in
Europe and the United States more supportive across the board,"
said SEB in Oslo's chief commodities analyst Bjarne Schieldrop.
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