World shares hit fresh 30-month highs on Friday, driven by bullish views of both economic growth and corporate earnings, although gains were threatened by rising oil prices linked to Middle East tension.
Brent crude rose above $103 a barrel, as unrest spreading across the Middle East fanned fears of a supply disruption in the major oil-producing region.
U.S. crude fell, but held above $86 a barrel, after jumping more than $1.00 the previous day.
There appeared little, however, to disrupt a global rally in stocks that has driven world shares up around 5 percent, with developed market indexes such as the U.S. S&P 500 , Japanese Nikkei 225 and European FTSEurofirst 300 gaining more than 6 percent.
The MSCI all-country world stock index was up 0.1 percent having earlier hit a new 30-month high. “There is just a greater conviction in the more promising outlook in global economic growth,” said Mike Lenhoff, chief strategist at wealth manager Brewin Dolphin.
“We are moving from recovery phase to a sustainable expansion.”
The FTSEurofirst 300 was flat after rising for five consecutive sessions.
An example of the growth-related drive came from France’s Lafarge which rose after it predicted stronger cement demand in its markets this year thanks to rapid expansion in emerging countries.
Earlier, Japan’s Nikkei closed up with tiny gains.
Investors, meanwhile, were keeping an eye on a Group of 20 central bank meeting ahead of a larger two-day event which appears set to struggle to make headway on an ambitious French agenda.
Oil prices — and their impact on global inflation — remained in focus as protestors in Bahrain and Libya bury people killed in recent clashes.
In Libya’s eastern city of Benghazi early on Friday, thousands of anti-government protesters crowded on to the streets, a day after “Day of Rage” demonstrations led to skirmishes with security forces in which more than 20 people may have been killed.
Tension between Israel and Iran also continued over the latter’s plans to send navy ships through the Suez Canal, a move that Israel has called a “provocation”.
Investors do not expect the rising tensions to disrupt the global risk rally too much unless the various situations become more violent and volatile.
“Short-term geopolitical nervousness will continue to underpin Brent prices, but in terms of fundamentals, support will come from the gradually recovering U.S. economy and the ongoing momentum in China,” said David Cohen, director at Action Economics in Singapore.
Rising inflation, meanwhile, was underlined by German producer prices for January exceeding forecasts to post their strongest year-on-year rise since October 2008, up 5.7 percent.
On foreign exchange markets, the euro slipped due to ongoing speculation European officials will struggle to agree on how to solve euro zone debt problems, while the dollar recovered losses as investors took a breather from selling before a U.S. market holiday. The euro traded 0.1 percent lower on the day at $1.3580.
Sterling meanwhile rose against both currencies on market talk that another member of the Bank of England’s Monetary Policy Committee had moved into the hawks’ camp by voting for a rate rise in February. Minutes of the February meeting, at which the bank left rates on hold at a record low of 0.5 percent despite rising inflation, are due for release on Wednesday.