Global markets: Stocks extend record rally, sterling endures rough week

A year-end rally in global equity markets extended gains on Friday, helped by data showing relatively strong U.S. growth, while sterling posted its worst week in more than two years on concerns over how Britain will leave the European Union.

The dollar firmed and US Treasury yields rose after the Commerce Department said gross domestic product increased at a 2.1% annualized rate in the third quarter, as expected, with consumer spending coming in stronger than previously reported.

MSCI’s gauge of stocks across the globe gained 0.40% to a record high, while Wall Street’s three key equity indices also marked new highs.

The preliminary US-China trade deal and the Federal Reserve’s increase of short-term liquidity in the repo market have allowed risk assets to gain, said Yousef Abbasi, global market strategist at INTL FCStone Financial Inc in New York.

“The deliverance of phase one of a trade deal and the Fed getting ahead of any potential systemic-type issues has cleared the path for this market to inch higher,” Abbasi said. “There isn’t anything that can shift sentiment dramatically.”

The benchmark S&P 500 extended its run of record highs to seven straight sessions, its longest streak in more than two years.

The Dow Jones Industrial Average rose 138.78 points, or 0.49%, to 28,515.74. The S&P 500 gained 19.83 points, or 0.62%, to 3,225.2 and the Nasdaq Composite added 43.74 points, or 0.49%, to 8,930.96.

European shares also rallied, with the pan-European STOXX 600 index rising 0.80%. Indexes in Frankfurt and Paris making similar gains in thin trading.

Emerging market stocks rose 0.10%.

Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan added a sliver, having risen 1.2% so far this week and almost 5% this month.

Some data reminded investors of potential weak spots in the world economy.

The mood among German consumers deteriorated unexpectedly heading into January, a survey showed, suggesting that household spending in Europe’s largest economy could weaken at the beginning of next year.

Sterling traded at $1.3011, up 0.03% on the day after a sharp reversal that left it down 2.3% for the week, its worst weekly fall since October 2017. Former Prime Minister Theresa May’s leadership was questioned at the time, leading the pound to drop 2.5%.

Overnight the pound slipped to below $1.30, a dramatic drop from a 19-month peak of $1.3514 after British Prime Minister Boris Johnson used his sweeping election victory last week to revive the risk of a hard Brexit.

Britain will leave the EU at the end of January and has set December 2020 as a hard deadline to reach a trade agreement.

The dollar index rose 0.33%, with the euro down 0.42% to $1.1073. The Japanese yen weakened 0.09% versus the greenback at 109.48 per dollar.

Oil fell, though prices notched a third straight weekly gain as the easing of U.S.-Chinese trade tensions has boosted business confidence and promises future global growth.

Brent settled down 40 cents at $66.14 a barrel, while West Texas Intermediate crude slid 74 cents to settle at $60.44 a barrel.

U.S. gold futures settled 0.2% lower at $1,480.90 an ounce.