World shares seen gaining more in 2014 as growth picks

An investor monitors trade at the Nairobi Securities Exchange. World stocks ended 2013 close to six-year peaks and benchmark bond yields were poised for their first annual rise since 2009 as investors celebrated a pick-up in global growth with expectations of more to come. FILE 

By Reuters

In Summary

• European stocks are expected to hit new highs in 2014, while Chinese, US and other major stock markets are also seen posting solid gains.
• Analysts do not foresee a sharp bond sell-off because inflation in major economies is expected to remain stubbornly low, while the European Central Bank and the Federal Reserve have pledged to keep interest rates low for a prolonged period.

World stocks ended 2013 close to six-year peaks and benchmark bond yields were poised for their first annual rise since 2009 as investors celebrated a pick-up in global growth with expectations of more to come.

Thanks to ultra-easy monetary policies and an improving economic outlook, equities enjoyed a vintage year in 2013. Wall Street was on track for its best year since 1997 with a 29 per cent gain, while Japan’s Nikkei ended up 56.7 per cent and European shares gained 16 per cent.

MSCI’s all-country world equity index was flat at 407.42 points, having hit its highest since late 2007 at 407.65 . The FTSEurofirst 300 index of top European shares was up 0.13 per cent at 1,313.52 points, on course for its best year since 2009.

Assets favoured by investors in economic downturns took a beating in 2013, with top-rated US and German bond yields trading near the highest in around two years and gold limping towards its worst annual performance in three decades.

With bets that the economic recovery will continue even as the US central bank steadily trims its bond-buying stimulus and that the euro zone will take more steps towards overcoming its debt crisis, investors look for more of the same in 2014.

“There is almost a complacency about 2014 and how well it will go,” said Hans Peterson, an asset manager. “There is still abundant liquidity even if the Fed started to taper and I think that is still the main theme ... Everything looks nice and easy right now.”

European stocks are expected to hit new highs in 2014, while Chinese, US and other major stock markets are also seen posting solid gains.

Gold is expected to remain depressed, while benchmark bond yields are seen rising only slightly, despite investors’ preference for riskier assets, the polls show.

Analysts do not foresee a sharp bond sell-off because inflation in major economies is expected to remain stubbornly low, while the European Central Bank and the Federal Reserve have pledged to keep interest rates low for a prolonged period.

While staying overweight in equities, Didier Duret, chief investment officer, said 2014 “will be a good opportunity to ... buy some good quality bonds as yields pick up above three per cent in the US and above two per cent in Germany.”