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(Reuters) – LONDON, July 1 (Reuters) – On Thursday, Europe’s financial markets got off to a great start in the second half of the year, with stocks overcoming a rapid resurgence in coronavirus infections in the region and the dollar and oil extending their robust first-half gains. The pan-European STOXX 600 came close to joining Wall Street at new highs after early 1% advances in London (.FTSE), Frankfurt (.GDAXI), Paris (.FCHI), and Milan (.FTMIB). The Nikkei (.N225) lost 0.3 percent in an Asia session shortened by a Hong Kong holiday, and the yen touched a 15-month low of 111.18 per dollar, as the US currency maintained its steady climb upward. Oil prices, meanwhile, showed no signs of easing. Brent was up about 1% to just over $75 a barrel, following a raging 45 percent first-half gain that was one of the strongest starts to a year on record. Government bond yields in the euro zone increased as the latest economic data revealed the 19-country bloc’s manufacturing sector expanded at a record pace last month, while raw materials costs rose at the fastest rate in well over two decades. find out more “As demand increased with the further relaxation of COVID-19 containment measures, euro zone manufacturing continued to rise at a rate unmatched in over 24 years of survey history in June,” said Chris Williamson, chief business economist at IHS Markit. “However, the current rise in demand’s sheer pace has created a sellers’ market, as capacity and transportation restrictions limit the availability of inputs to manufacturers, driving industrial prices higher at a rate not seen before in the study.” The benchmark 10-year Bund yield in Germany was up one basis point on the day, at -0.19%. The 10-year yields in France, Spain, and Italy all increased by the same amount,,. Government bond rates, which determine borrowing costs in most major economies, have risen dramatically this year on expectations that central banks will reduce support as inflation rises as a result of the global recovery. The euro zone data’s input prices index jumped to 88.5 from 87.1, the highest in the survey’s history, due to a lack of shipping containers and supply chains severely impacted by the epidemic. Inflation in the eurozone fell to 1.9 percent last month, according to official figures released on Wednesday. On the phone from Singapore, ING economist Rob Carnell said, “The virus is still playing a role… although it’s tough to discern any direction in anything at the moment.” “There’s a broad sense that the dollar isn’t such an awful unit to keep,” he said, as traders awaited Friday’s U.S. jobs data for indications on the Federal Reserve’s next move. “Everyone seems to be a touch anxious.” TENSIONS IN TAIWAN In China, equity markets rose modestly overnight to celebrate the Communist Party’s centennial, but President Xi Jinping’s nationalist speech in Tiananmen Square did nothing to calm geopolitical anxieties, and the currency dropped slightly. Data from Asia showed a mixed picture, with Japanese manufacturers’ optimism at a two-and-a-half-year high but manufacturing activity decreasing across the region – particularly in Vietnam and Malaysia – as the epidemic resurfaced. find out more Slower vaccination rates in Asia, as well as the extension of limitations to combat the virus’ spread, as well as a regulatory crackdown on Chinese tech behemoths, have kept regional markets in the doldrums this year. The MSCI ex-Japan index finished the first half with a gain of 5.8%, compared to a gain of 11.4 percent for world stocks (.MIWD00000PUS) and a gain of 14.4% for the S&P 500, which finished the first half with its fifth consecutive record on Wednesday. However, traders believe that U.S. payrolls on Friday will startle markets awake from their slumber, which has seen currencies locked in some of their narrowest trading ranges in decades. On Wednesday, private payrolls in the United States exceeded expectations, though they are an inconsistent predictor of Friday’s broader indications. In addition to the current lows recorded by the Japanese yen, overnight dollar/yen implied volatility is at its highest level in more than three months. According to MUFG’s currency analyst Lee Hardman, June was the greatest month for the dollar since Donald Trump was elected president of the United States in November 2016. “”The hawkish shift in the Fed’s monetary stance has been the major driver,” he stated. Market participants are less convinced that the Fed would sustain its accommodative policies in the future years as a result of the more hawkish outlook.” The dollar index, which compares the greenback to a basket of six major currencies, reached 92.500, the highest level since April. The yield on ten-year US Treasury bonds was up a smidgeon at 1.4747 percent. Metals prices appeared to be stabilizing below May highs, while oil prices were aiming for multi-year highs hit earlier this week. Brent crude futures were last trading at $75.60 a barrel, up 1.31 percent. Corn, a food staple that has risen almost 20% this year, sustained a steep overnight rally after poor planting numbers in the United States bolstered prices. Tom Westbrook contributed additional reporting from Singapore, and Kim Coghill edited the piece. The Thomson Reuters Trust Principles are our standards./nRead More

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