European stocks hit a new all-time high and Wall Street stock futures signaled the S&P 500 heading for its 30th all-time high of the year as investors ignored US central bank nervousness limiting its support for financial markets at the time of the pandemic.
The Europe Stoxx 600 rose 0.4 percent in early trades. The UK FTSE 100 also rose 0.4%.
Futures that bet on the direction of the S&P gained 0.3%. The yield on the benchmark US Treasury bond, which moves against its price, fell 0.02 percentage points to 1.482 percent as traders bought the debt.
The moves came as some analysts expected the Fed, which concludes its last monthly meeting on Wednesday, to advance its projections for its first interest rate hike after the one-year pandemic until 2023. The central bank could also hold initial talks on reducing its $ 120. billion monthly bond purchases.
“Economic data shows that the US economy is growing at a rapid rate,” said ANZ economist Tom Kenny. But after repeated comments from Fed Chairman Jay Powell that the central bank wants to see substantial improvements in the US labor market and that a surge in US inflation will be temporary, “we do not anticipate any change. in the language of political guidance on either rate. or asset purchases, ”he added.
“We think it will be difficult for the Fed to avoid discussing the cut, but relatively easy to dismiss any expectation of imminent action as very premature,” added Steve Englander, Standard Chartered strategist.
In 2013, when former Fed Chairman Ben Bernanke announced that the central bank was on the verge of cutting back on asset purchases after the financial crisis, it upended asset markets in what has become the ‘tap tantrum ”.
“We anticipate the [Fed committee] giving himself a few more months to assess incoming inflation and growth data, recognizing the potential embarrassment of yet another episode of premature hawkishness, ”Englander said.
The Fed’s asset purchases, which were tracked by central banks around the world, lowered government bond yields and increased the attractiveness of riskier assets like stocks.
The S&P had reached 28 closing highs for 2021 at the end of last week, according to Credit Suisse strategist Jonathan Golub, and hit another high on Monday.
“It is important to note that economic activity has improved during this period, which is a real catalyst for the advance of the S&P 500,” Golub said. Economists expect U.S. GDP to grow at an annualized rate of around 10% in the second quarter of this year, as the global economy experiences its strongest recovery from a recession in eight decades.
The dollar index, which measures the US currency against that of trading partners, fell 0.1% on Tuesday as the positive mood in the stock and bond markets lessened the appeal of the safe-haven asset. The euro strengthened 0.2% against the dollar to $ 1.2139. The British pound was stable at $ 1.4111.
International benchmark Brent crude rose 0.4% to $ 73.25 a barrel.