World stocks, on Tuesday, August 1, stayed on their longest streak of monthly gains in more than a decade, amid further signs that the global economy is in fine fettle, while the beaten-down dollar edged up slightly from 14-month lows.
Softening U.S. inflation and incessant political turmoil has hit prospects of another Federal Reserve rate hike in coming months and sent the dollar down 10 percent from its January peaks.
The dollar’s decline, low inflation and robust global growth has stoked appetite for stocks, however, with the MSCI ACWI .MIWD00000PUS extending its run after the index logged its longest streak of monthly gains since 2003-04 in July.
U.S. stock futures ESc1 SPc1 were up 0.3 percent.
In Europe, the main benchmark STOXX 600 was off to firm start to August after two months of mild losses.
“Data and market behavior are consistent with our global reflation theme,” strategists at Morgan Stanley, led by Hans Redeker, said in a note, pointing to strong Chinese factory data, corporate earnings and surging South Korean exports.
“The combination of USD weakness with decent, but not too strong, US economic growth works in favor of risk appetite, pushing financial conditions globally, and especially in the US, higher,” said the strategists.
The dollar edged up slightly against major currencies although the outlook remained downbeat following the ouster of recently hired White House communications chief Anthony Scaramucci overnight.
“I think the short dollar trade is still the broad consensus trade in the financial markets,,” said Esther Maria Reichelt, an FX analyst at Commerzbank in Frankfurt.
“But we are approaching important levels against other currencies, such as 1.20 on the euro, which may prompt some concerns from other central banks.”
The euro is widely seen benefiting the most from the greenback’s slide. It has risen 12 percent against the dollar this year, with most of the gains coming in the last three months, and is trading at its highest in more than two years, Reuters reports.
Continued strength for the euro could take a toll on European corporate earnings, however, with roughly half the revenue of top regional firms generated outside the euro zone, Reuters reports.
