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World shares hit record, oil over $US60

Marc Jones
·3-min read

World shares have hit a record high and oil has surpassed $US60 a barrel for the first time in a year, on hopes a $US1.9 trillion COVID-19 aid package will be passed by US lawmakers as soon as this month.

Even news that South Africa had halted the rollout of AstraZeneca's vaccine after a study showed it gave only limited protection against the country's more contagious variant of the virus was not going to put off equity markets.

MSCI's 50-country index of world stocks has hit its ninth record high of 2021 as Tokyo's Nikkei jumped on talk of Japan relaxing emergency restrictions and as China's markets got busy before the start of the lunar new year.

Europe then made a strong start as higher oil prices and inflation expectations lifted basic resource and banking shares, and France's Veolia launched a hostile 11.3 billion-euro takeover bid for waste and water rival Suez.

Bond markets were focused on how far inflation might rise if the current mix of stimulus, rising oil and food prices and expectations for a reopening economies continue to hold.

Ten-year US Treasury yields, which are one of the main drivers of global borrowing costs, climbed to 1.2 per cent, their highest since the peak of coronavirus uncertainty last March. Break-even rates, which are designed to account for inflation, traded as high as 2.21 per cent, their highest since 2014.

In Europe on Monday, Germany's 10-year yields were up three basis points at -0.415 per cent, near five-month highs.

Brent crude touched an intraday high of $US60.06 a barrel, the highest since January last year.

Saudi Arabia's pledge of extra supply cuts in February and March on the back of reductions by other OPEC members its allies, including Russia, is helping to balance global markets and support prices.

In a sign that supplies are tightening, the six-month Brent spread hit its highest in more than year, $US2.45.

Asia's rally had seen Japan's Nikkei close up two per cent, Chinese blue-chip shares advance 1.3 per cent and Australian shares finish 0.6 per cent higher.

Wall Street futures were also pointing higher after the Nasdaq and S&P 500 climbed to record highs on Friday as weak monthly US jobs data supported expectations of stimulus and after some strong corporate earning.

US President Joe Biden and his Democratic allies in Congress forged ahead with their stimulus plan on Friday as lawmakers approved a budget outline that will allow them to muscle through in the coming weeks without Republican support.

US Treasury Secretary Janet Yellen predicted the United States would reach full employment next year if Congress could pass its support package.

The dollar came off a four-month high against the Japanese yen to be last at 105.50.

The euro was weaker at $US1.2027 after rising 0.7 per cent on Friday to a one-week high.

The risk-sensitive Australian dollar eased from a one-week high to $US0.7675 while South Africa's rand fell nearly 0.5 per cent after its vaccine troubles.