Global stock prices approached record highs on Wednesday, as US bond yields hit their lowest levels in a month, with investors betting the Federal Reserve is far from slashing its economic stimulus.
The focus is on the release of U.S. consumer price data on Thursday and a meeting of the European Central Bank for new clues on when policymakers could start pulling back support for the United States. European economy deployed after the COVID-19 crisis.
The MSCI All Country World Index (.MIWD00000PUS) last stood at 716.42, after hitting an intraday high of 718.19 on Tuesday, led by gains in Europe.
European stocks (.STOXX) were down 0.1%, the UK FTSE (.FTSE) was down 0.5%.
In Asia, the largest MSCI index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) was down 0.3% and Japan’s Nikkei average (.N225) was down 0.4%.
In the US, Nasdaq futures were 0.2% firmer and S&P 500 futures were up 0.1%.
The yield on US 10-year debt, on the other hand, hit a new month low for the second day in a row, hitting 1.504% and down a quarter of a percentage point from the 14-month high reached in March.
The 10-year German Bund yield, which is closely correlated to US Treasuries, extended Tuesday’s decline to fall to -0.240%, the lowest since May 7, as eurozone investors continue to anticipate an accommodating result at the ECB policy meeting on Thursday.
“While the labor market recovery is contained, any discussion at the Fed on tapering is unlikely to gain momentum, even if it starts soon,” said Naokazu Koshimizu, senior rate strategist at Nomura Securities.
“So those who had bet on a steepening of the yield curve are unwinding their positions while some investors are also now buying to gain carry.”
U.S. payroll data last Friday showed hirings had not grown as quickly as economists had expected, despite growing signs of a labor shortage. Read more
Many analysts believe that more evidence of strong job growth would be needed for the Federal Reserve to step up discussions on the cut.
The US central bank has said inflation increases this quarter will be transitional and will not threaten price stability, one of its main mandates.
US consumer price data on Thursday is expected to show the overall annual inflation rate has risen to 4.7% and core inflation has risen to 3.4%.
While these numbers will be well above the Fed’s inflation target of 2%, many economists expect the inflation rate to decline in the coming months, allowing the Fed to wait before taking reduction measures.
Still, some investors remain suspicious.
“Nothing we see in tomorrow’s report can prove or disprove any of the theories about the future path of inflation, but I suspect the market is not fully believing in the Fed’s permanent wait message. “said James Athey, chief investment officer at Aberdeen Standard Investments.
“So I see the potential for a higher print to push real yields and shorter-dated yields higher, flattening the curve and raising the dollar. This might not be an ideal environment for risky assets. “
Inflation data from China showed its producer price index jumped 9.0% from a year earlier, the highest in more than 12 years, due to soaring prices. commodity prices. Read more
However, the rise in consumer prices was weaker than expected, helping to ease concerns. As China’s central bank slowly cuts the pandemic-induced stimulus package, key leaders have pledged to avoid any sharp policy shift and keep borrowing costs low.
The Chinese yuan, whose rally to a three-year high last week was propelled in part by speculation that Beijing might want a stronger yuan to keep inflationary pressures under control, edged up to 6.3945 per dollar.
The other currencies hardly budged. The US dollar index was stuck at 90.077.
The euro held steady at $ 1.2179, while the dollar held steady at 109.47 yen.
Deutsche Bank’s currency volatility index (.DBCVIX) hit its lowest level since February 2020 on Tuesday and sank further on Wednesday.
With European bond markets calm, Greece followed Italy with a bond sale, opening the books on Wednesday for a 10-year issue.
Oil prices held steady after US Secretary of State Antony Blinken said that even if the US reached a nuclear deal with Iran, hundreds of US sanctions against Tehran would remain in place. Read more
U.S. crude futures closed above $ 70 a barrel for the first time since October 2018 on Tuesday and last stood at $ 70.40, up 0.5%.
Brent futures rose 0.5% to $ 72.56, after hitting their highest level since May 20, 2019.
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