World stocks rose on Monday, hovering near a 29-month high on further signs of global economic recovery, and copper rallied to a record high while U.S. 10-year Treasury yields hit their highest since May.
Oil prices were also higher, while the euro fell to a two-week low against the dollar after a bigger than expected fall in German industrial orders.
World equities as measured by the MSCI All-Country World Index advanced 0.2 percent after gaining 2.2 percent last week. The index is up 3.4 percent so far this year, while MSCI emerging markets index is down 2 percent.
At the moment, clients are feeling that any dips can be bought into and the trend is an upwards one, and I can't see that being thrown off course in the short term, said Giles Watts, head of equities at City Index in London.
Concerns over higher inflation in booming emerging markets, further indications of economic recovery gathering pace in the United States, modest valuations and tentative signs of stability in the euro zone sovereign debt crisis have fueled the outperformance of shares in developed markets.
Data from fund tracker EPFR Global showed investors pulled out $7 billion from emerging markets equity funds in the week of Feb 4, their biggest outflow in three years.
The U.S. S&P 500 and Dow Jones industrial average hit new 2-1/2-year highs on Friday as a fall in U.S. unemployment raised optimism of a labor market recovery.
U.S. stock index futures put on 0.3 percent, indicating a firm open on Wall Street. The pan-European FTSEurofirst 300 rose 0.9 percent on Monday, while Germany's DAX added 0.9 percent, shrugging off the news that German industrial orders fell by 3.4 percent on the month in December. Japan's Nikkei average put on 0.5 percent, hitting a nine-month high.
In terms of valuations, the S&P 500 carries a 12-month forward price-to-earnings ratio of 13.3 times, compared with a 10-year average of 15.5 though more expensive than the emerging markets index's 11.3 times, Thomson Reuters Datastream shows.
TREASURY YIELDS UP
As optimism over the U.S. economic recovery grew, investors were also shifting away from government bonds.
Yields on benchmark 10-year Treasuries rose 3 basis points to 3.6701 percent, their highest level since early May and up about 28 basis points since the start of the month.
Investors are now reflecting that an ever-improving outlook for the U.S. is a new factor in the equation, which is weighing quite heavily on U.S. Treasuries, said Kornelius Purps, strategist at Unicredit in Munich.
We have not only the (non-farm) labor report -- which was a mixed bag but seen as a positive -- we have the ISM, which were extremely positive and indicate the U.S. economy is recovering at quite a healthy clip.
Spreads on 10-year Portugese government bonds over benchmark German Bunds rose 5 bps to 386 bps, though still down about 8 bps since the beginning of the month, after Portugal, one of the weakest euro zone economies, planned a five-year syndicated bond.
The euro eased 0.3 percent to $1.3552, while the dollar was up 0.2 percent against a basket of major currencies.
Copper put on 1 percent to $10,152.75 a tonne after hitting a record high of $10,153.50, while benchmark U.S. oil futures
rose 0.3 percent to trade above $89 a barrel.
(Additional reporting by Simon Jessop, William James and Neal Armstrong; Editing by Ron Askew)