Global shares scale new highs, dollar falls

The dollar eased but world stock markets scaled new highs on Wednesday, with investors looking beyond weak economic data to focus on a likely continuation of massive central bank stimulus measures.

MSCI's all-country world index climbed to its fourth intraday high in a row, while the Nasdaq Composite hit a fresh high and the Euro STOXX 600 came close to breaching an all-time peak reached three weeks ago.

The upbeat tone for equities came in spite of signs that Asia's factory activity lost momentum in August and US private employers hired far fewer workers than expected last month, likely due to a resurgence in Covid-19 infections.

But the US labor market continues to recover, with private payrolls increasing last month by 374,000 jobs, or 48,000 more than in July, the ADP National Employment Report showed.

US manufacturing activity unexpectedly picked up in August amid strong order growth, providing markets a bit of optimism.

Many market participants expect central bank stimulus measures to remain and companies to report strong earnings despite a deceleration in economic data.

"We're in the moment where it's still semi-Goldilocks - there is the inflation element that is still for the moment being discarded by central bankers," said Olivier Marciot, senior portfolio manager with Unigestion.

"Earnings are very good, macro is very strong and still the central banks are remaining very accommodative," Marciot said.

MSCI's all-country world index rose 0.41 per cent and the broad STOXX Europe 600 index gained 0.52 per cent.

On Wall Street, the Dow Jones Industrial Average fell 0.11 per cent, while the S&P 500 added 0.20 per cent and the Nasdaq Composite advanced 0.67 per cent.

The gains in Asia came in spite of China's Purchasing Managers' Index (PMI) showing a contraction in activity for the first time in nearly 18 months, because of Covid-19 containment measures and supply bottlenecks.

"We're moving past the point of peak growth. The strongest period of the recovery now looks to be behind us, we're seeing that in the economic data," said Hugh Gimber, global market strategist at JP Morgan Asset Management.

"The recovery is slowing, but it remains on track. And so that I think is what's underpinning markets."

The dollar traded near its lowest point in nearly three weeks versus major peers, as investors await a key US jobs report on Friday for clues to when the Federal Reserve begins paring its stimulus. Fed Chair Jerome Powell has said an improving labor market is a prerequisite for tapering to begin.

Powell tried last week to distance the two concepts of the Fed tapering its bond purchases from when it begins to raise interest rates, said Kevin Flanagan, head of fixed-income strategy at WisdomTree Investments Inc.

"You have to give the Fed kudos; they've done a very good job with their forward guidance with respect to tapering," Flanagan said. "They've met their criteria on the inflation side, and now it's on the jobs number."

Markets are likely to remain quiet until Friday, with an attempt by bond traders to push yields on the 10-year Treasury above the 1.32 per cent to 1.33 per cent level unsuccessful, he said.

The benchmark US note's yield rose 0.8 basis point to 1.3105 per cent.

The dollar index, which tracks the greenback versus a basket of six currencies, fell 0.24 per cent to 92.426.

The euro rose 0.36 per cent to $1.1850, while the yen was unchanged at $110.0200.

Government bond yields across the euro area touched their highest levels in around six weeks, pushed up by unease over the future pace of European Central Bank bond purchases.

Germany's 10-year Bund yield briefly touched its highest level in just over six weeks at -0.354 per cent before steadying at around -0.365 per cent.

Copper prices fell more than 2 per cent after data showed slower factory activity in August.