LONDON (Reuters) – European equities rose after a shaky start and the dollar rose on Wednesday, while the yield on the US Treasury at ten years fell from a ten-month high, helped by declining policy makers against talks about reduced Fed support.
After Asian stocks experienced modest gains, European stocks opened lower and rose slightly, with the pan-European STOXX 600 up 0.2% on the day, at 0918 GMT.
The MSCI global equity index, which tracks the shares of 49 countries, rose 0.2%, backing to all-time highs, and MSCI’s main European index rose by a similar amount.
China recorded its biggest daily jump in COVID-19 cases in more than five months, despite four cities being closed and the Dutch government said it would extend the blockade measures on Tuesday.
Investors are closely following the discussion about the reduction in volume, that is, the possible decline in monetary stimulus from the Fed.
Several Federal Reserve policymakers, including Loretta Mester, Esther George, James Bullard, and Eric Rosengren, pushed back the idea that the Fed would reduce its asset purchases soon.
These comments, along with a well-received ten-year treasury auction, pushed back the U.S. ten-year yield, far from the ten-month high of 1.187% reached in the previous session.
At 09.19 GMT, the benchmark yield stood at 11.1189%.
The yield curve, which had reached its strongest since May 2017, in line with expectations of a large fiscal stimulus under a new democratic administration, narrowed slightly to 96.8 basis points.
“We believe that the potential for fiscal stimulus, coupled with a normalization of economic activity as vaccine deployment increases, justifies slightly higher U.S. Treasury yields,” UBS strategists wrote. in a note to customers.
“To acknowledge this, we have raised the U.S. Treasury’s profitability forecasts to 10 and 30 years by 0.1 percentage points this year to 1.0% and 1.7%, respectively, at the end December, ”they said, adding that they do not expect yield accumulation to go much further, because central banks remain accommodating and the Fed has indicated a tolerance for higher inflation.
In light of the recent performance jump, December U.S. inflation data, forecast at 13:30 GMT, will be closely monitored.
Recently, the U.S. dollar broke its downward trend with a three-day winning streak, and fell again on Tuesday. It was steady overnight, but began trading early in London on Wednesday, questioning whether its rebound had ended.
At 09.20 GMT, it was up 0.1%, to 90,136, against a basket of currencies.
With at least five Republicans joining the Democrats’ push to accuse President Donald Trump of assaulting the U.S. Capitol, Marshall Gittler, head of investment research at the BDSwiss group, said preventing Trump he could run for office in the future “would definitely eliminate the premium” from the dollar and allow the currency to weaken further.
In Europe, bond yields fell. Italian bonds, which were sold on Tuesday due to political uncertainty, lagged behind Germany.
November eurozone industrial production data will be presented at 1,000 GMT.
Against the dollar, the euro fell around 0.2%, to $ 1.21875, at 09.20 GMT. Riskier currencies such as the Australian and New Zealand dollars also fell as the US dollar rose.
Bitcoin rose slightly, however, to $ 34,999, still down about 17% from the all-time high of $ 42,000 reached on Friday last week.
Oil prices rose, gaining for the seventh day in a row, with crude oil between the US and Texas Brent trading at their highest level since February, after industry data showed a larger-than-expected drop in inventories. and that investors abandon the impact of the pandemic.
Reports by Elizabeth Howcroft, edited by William Maclean