(Addition of the closure of the European market)
* MSCI’s ACWI, S&P 500 and pan-European index hit records
* The ECB maintains the stimulus at its last meeting
NEW YORK / LONDON, June 10 (Reuters) – Global equities surged and bond yields were subdued Thursday after a jump in US inflation was not deemed enough to change Federal Reserve opinion that the rise in consumer prices will be transitory or change its easy monetary policy. Politics.
MSCI’s benchmark, S&P 500 and a key European index hit record highs after the US Department of Labor said the consumer price index during the 12-month period ended in May accelerated 5.0%, the largest year-over-year increase since August 2008.
As a sign of market complacency, the yield on the 10-year US Treasury bill fell 1.2 basis points to 1.4772% after surpassing 1.5% after the data was released. The dollar index traded little.
The initial bond sale was subdued as the CPI 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.
Many investors believe economic growth will soon slow, perhaps significantly, and outweigh any acceleration in inflation, which will always be temporary, said Joseph LaVorgna, chief economist for the Americas at Natixis at New York.
“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. LaVorgna said.
“The (equity) market will ignore the data. He will rally despite everything, ”he said.
The MSCI All Country World Index rose 0.35% to 718.05 after breaking its previous record of 718.19 set on Tuesday, and the pan-European STOXX 600 index closed 0.1% higher at 454, 83 after reaching a new high.
On Wall Street, the Dow Jones Industrial Average rose 0.35%, the S&P 500 by 0.45% and the Nasdaq Composite by 0.49%.
Risk assets have remained buoyant, with central bankers on both sides of the Atlantic signaling their willingness to keep monetary taps open until the post-pandemic recovery sets in, believing inflationary pressures will be short-lived .
A surprisingly strong impression of inflation in the United States in April spooked investors, causing Thursday’s May data to run cautiously.
The European Central Bank raised its growth and inflation forecasts, but vowed to maintain ample stimulus, fearing that a pullback now could accelerate a worrying rise in borrowing costs and stifle the recovery .
The dollar index fell 0.064%, the euro down 0.05% to $ 1.2172. The Japanese yen strengthened 0.13% against the greenback to 109.48 per dollar.
Overnight, fixed income markets were the big drivers, with some analysts signaling a pullback in US stimulus efforts, while others suggested a likely erasure of short positions in US government bonds before the May CPI.
Short positions in Treasuries were the highest since 2018, according to positioning data from JP Morgan last week.
Additional reporting by Swati Pandey in Sydney and Thyagu Adinarayan in London; Editing by Ana Nicolaci da Costa, Christopher Cushing, Angus MacSwan, Catherine Evans and Jane Merriman