Global stock market party settles down for central bank reflection

NEW YORK (Reuters) – World stock markets hit fresh highs on Thursday amid investor optimism over U.S. tax reforms and global economic growth, while the dollar gained as data pointed to solid U.S. growth.

The U.S. trade deficit fell in August as exports of goods and services rose to the highest level in more than 2-1/2 years. Separately, the number of Americans filing for unemployment benefits fell more than expected last week.

Gold dipped on news of the data as it bolstered the notion U.S. interest rates would be hiked in December. Philadelphia Federal Reserve Bank President Patrick Harker said he was still penciling in one more rate hike this year and three in 2018.

The dollar index, tracking the greenback against a basket of key currencies, held under seven-week highs as investors awaited Friday’s U.S. jobless report for September to assess the impact of Hurricanes Harvey and Irma. The storms proved a drag on robust business spending that was seen in the trade data.

MSCI’s all-country world stock index .MIWD00000PUS edged higher to set a new intraday peak, while the Dow, SP 500 and Nasdaq all set fresh highs.

The Dow Jones Industrial Average .DJI rose 41.22 points, or 0.18 percent, to 22,702.86. The SP 500 .SPX gained 5.99 points, or 0.24 percent, to 2,543.73 and the Nasdaq Composite .IXIC added 15.08 points, or 0.23 percent, to 6,549.71.

European bourses also gained, with the pan-regional FTSEurofirst 300 index .FTEU3 rising 0.16 percent to 1,535.03.

A Reuters poll showed global stocks will continue to climb over the coming year on rising optimism about growth worldwide. However, a slim majority of equity strategists also expect the current eight-year bull run to end in 2018.

U.S. investors have begun to warm to the notion that reform of U.S. fiscal policy will occur by the first quarter, said Phil Orlando, chief equity strategist at Federated Investors in New York.

Most investors felt that nothing would come of President Donald Trump’s tax reform effort until last week, he said.

“Only 30 percent of us were comfortable that something might happen. That could take up 2019 estimates for GDP growth and earnings per share, which could drive the SP 500 above our 3,000 target,” Orlando said.

Oil prices rose as signs Saudi Arabia and Russia would limit production through next year outweighed record U.S. exports and the return of production at a major Libyan oilfield.

Brent LCOcv1 rose $1.19 to $56.99 per barrel, while U.S. crude CLcv1 rose 96 cents to $50.94 per barrel.

The dollar index .DXY rose 0.44 percent, with the euro EUR= down 0.41 percent to $1.1711. The Japanese yen strengthened 0.07 percent versus the greenback at 112.70.

Reporting by Herbert Lash; Editing by Bernadette Baum

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