Global shares return to record high as Irma loses strength

By Marc Jones

LONDON (Reuters) - World shares returned to a record high on Monday, on relief that hurricane Irma looked to be losing strength in the United States and that North Korea's anniversary celebrations at the weekend passed without any new missile test.

MSCI All Country World Index (MIWD00000PUS), which tracks roughly 2,400 stocks in 47 countries, climbed a new peak as Europe's insurers jumped 2.2 percent (SXIP) on hopes Irma would not prove as costly as feared.

The relief over North Korea and a weaker yen had also given Tokyo (N225) its best session since June in Asia (T), as investors began to lose their appetite for safer assets like gold and U.S. Treasuries (US10YT=RR).

Irma caused a number of deaths and knocked out electricity to 3 million homes and businesses on its way up the Florida coast. But it had weakened to a category one hurricane and was expected to slow into a tropical storm during the day and to a tropical depression by Tuesday.

Winning a reprieve from risk aversion, the dollar (DXY) registered its biggest gains in the currency markets in 10 days. It added 0.5 percent against its perceived safe-haven Japanese counterpart the yen and clawed back ground against the high-flying euro as an ECB policymaker flagged caution about the single currency's recent rise.

"The good news was that the eye of Hurricane Irma took a path west of Miami and has since weakened to a Category 1 storm so that damage in Florida – whilst still severe... appears not to be quite as catastrophic as had been feared last week," said Daiwa Capital Markets strategist Chris Scicluna.

"And thankfully there was no bad weekend news out of North Korea either."

Japan's Nikkei (N225) had risen 1.4 percent after Pyongyang held a massive celebration to congratulate the nuclear scientists and technicians who steered the country's sixth and largest nuclear test a week earlier.

The United States and its allies had been bracing for another long-range missile launch to mark the 69th anniversary of North Korea's founding on Saturday.

The sense of relief lifted E-Mini futures for the S&P 500 (ESc1) by 0.5 percent, while yields on 10-year Treasury notes rose 3 basis points to 2.09 percent (US10YT=RR), barely budging in European trading.

South Korea's main index (KS11) added 0.8 percent, while MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) gained 0.4 percent.

"It's too early to say the (North Korean) risks are gone, but one thing for sure is that market players now think the situation won't get worse as it did some weeks ago," said Lee Kyung-min, a stock analyst at Daishin Securities in Seoul.

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Lee said many foreign investors and domestic institutions were purchasing South Korean tech and chemicals shares as quarterly earning season neared.

The dollar hovered at 108.50 yen , up from Friday's 10-month trough of 107.32. Against a basket of currencies, it added 0.15 percent to 91.490 (DXY) still close to last week's 2-1/2-year low of 91.011.

The euro eased to $1.2020 , having hit a top of $1.2092 on Friday amid speculation the European Central Bank was closer to starting a wind-back of its stimulus programme.

ECB officials last week generally agreed their next move would be to cut their bond purchases and discussed a range of options, Reuters reported.

RELAXED YUAN CONTROLS?

China's central bank was also a focus in Asia after sources said it planned to scrap reserve requirements for financial institutions settling foreign exchange forward yuan positions with effect from Monday.

Analysts suggested that the official confirmation suggested an anxiousness in Beijing to quash one way bets on a rise in the yuan as outflows ease and exporters face strain.

"The removal potentially makes it easier for traders to purchase the USD, easing the pressure for yuan appreciation," said analysts at ANZ in a note.

"The change likely signals some discomfort about the stronger yuan and its impact on Chinese exports."

The dollar was up 0.3 percent against the offshore yuan at 6.5269 yuan , off a low of 6.4437.

There were also reports Beijing was planning to shut down local crypto-currency exchanges, dealing a blow to bitcoin's recent stellar rally.

Bitcoin was quoted at $4,300 (BTC=BTSP) on the BitStamp platform, off a recent record high of nearly $5,000.

In commodity markets, gold softened 0.7 percent to $1,337.81 an ounce , away from a one-year peak of $1,357.54.

Oil prices regained a little ground after the Saudi oil minister discussed the possible extension of a pact to cut global oil supplies beyond March 2018 with his Venezuelan and Kazakh counterparts.

The news of the talks on Sunday helped offset the downward pressure on oil prices amid worries that energy demand would be hit hard by Hurricane Irma.

U.S. crude CLcv1 was trading 36 cents firmer at $47.84 a barrel, while Brent LCOcv1 rose 22 cents to $54.00.