(New everywhere, updates prices, market activity and comments on gold, oil regulation)
* MSCI’s ACWI, S&P 500 and pan-European index hit records
* The ECB maintains the stimulus at its last meeting
* Benchmark Treasury yields slide to 3-month low
NEW YORK, June 10 (Reuters) – Global equities hit new highs and bond yields fell on Thursday after a surge in U.S. inflation was deemed insufficient to change the Federal Reserve’s accommodative monetary policy that the rise in consumer prices will be temporary.
MSCI’s global benchmark, S&P 500 and a pan-European stock index surged after the US Department of Labor said the consumer price index during the 12-month period ended in May accelerated of 5.0%, the largest year-on-year increase since August 2008.
The report was largely in line with expectations, said Subadra Rajappa, head of US rate strategy at Societe Generale in New York.
“The market is really buying into the narrative that the rise in inflation is actually transient because you don’t necessarily see it being built into the bond market fears,” Rajappa said.
The yield on the 10-year US Treasury bill fell to a three-month low of 1.460%. When investors worried about inflation in March, the yield climbed to 1.776%.
Many now believe that economic growth will slow down and that any acceleration in inflation will be temporary, said Joseph LaVorgna, chief economist for the Americas at Natixis in New York.
“The (equity) market will ignore the data. He’s going to come together no matter what, ”LaVorgna said.
“If the economy turns out to be weaker in the next three to six months than people think, it won’t even matter if inflation continues to surprise on the upside,” he said. he declared.
The MSCI All Country World Index rose 0.45% to 718.81, breaking its previous record set on Tuesday. The pan-European STOXX 600 broke a new high before closing slightly higher at 454.56. The European Central Bank raised its recovery outlook and pledged to maintain the stimulus measures.
On Wall Street, the Dow Jones Industrial Average rose 0.26%, the S&P 500 gained 0.55%, beating its previous record, and the Nasdaq Composite rose 0.81%, boosted by growth stocks which thrive on low interest rates.
As wages rise, prices for most commodities other than energy have fallen, while timber, grains and meat have fallen, said Thomas Hayes, chairman and managing member of Great Hill Capital LLC.
The “rate of change of inflation has alarmed people, especially in the basket of basic commodities. The softening makes people a little more comfortable, ”said Hayes. “With the 10 years barely moving away from this news, I’m inclined to start putting money to work.”
Surprisingly high inflation in the United States in April rocked investors, prompting caution ahead of Thursday’s May data. Still, risk assets remained buoyant, with central bankers on both sides of the Atlantic showing their willingness to keep the monetary taps open until the recovery takes hold.
The ECB said it would buy bonds at a “significantly faster” pace than at the start of the year, reaffirming its March commitment as expected by most central bank watchers.
In the United States, data showed people filing new jobless claims fell last week to the lowest level in nearly 15 months.
The dollar index fell 0.071%, the euro down 0.07% to $ 1.217. The Japanese yen strengthened 0.19% against the greenback to 109.42 per dollar.
Oil prices hit their highest level in more than two years in volatile trade on optimism of strong economic demand after new jobless claims in the United States fell to their lowest since the first wave of COVID-19 in the country last year.
Brent futures were up 30 cents to $ 72.52 a barrel at 1:24 p.m. EDT (5:24 p.m. GMT), while U.S. West Texas Intermediate (WTI) crude rose 33 cents to settle at $ 70.29 per barrel.
US gold futures came in at 1,896.40 an ounce.
Reporting by Herbert Lash, additional reporting by Simon Jessop in London, Swati Pandey in Sydney, Thyagu Adinarayan in London; Editing by Angus MacSwan, Catherine Evans, Jane Merriman and David Gregorio