Global equities hit record highs as bond yields fell

LONDON v TOKYO (Reuters) – Global stock markets boosted highs on Wednesday as bond yields eased, after data showed US inflation did not rise too quickly as the economy reopened.

With declining fears, for now, that high inflation could jeopardize the Federal Reserve’s accommodative stance, European stocks opened up 0.1% more.

The gains were limited after Johnson & Johnson said it would delay the launch of the COVID-19 vaccine in Europe, after U.S. health agencies recommended stopping its use in the country after six women developed rare blood clots.

Led by Hong Kong’s Hang Seng, most Asia-Pacific stock indices also rose.

U.S. Treasury benchmark yields continued to fall, marking a new three-week low.

S&P 500 futures pointed to a further 0.1% rise after the S&P 500 closed at record highs on Tuesday.

Japan reversed the trend, with the Nikkei falling 0.4%, as a growing number of coronavirus cases raised doubts about its economic recovery with 100 days to go before the Olympics are scheduled for Tokyo. .

Measuring MSCI equity yields in 50 countries advanced 0.2% to a record high.

The U.S. consumer price index rose 0.6% in March, the largest increase since August 2012, as rising vaccinations and fiscal stimulus triggered accumulated demand, according to showed the data on Tuesday. Economists surveyed by Reuters had predicted that the CPI would rise by 0.5%.

During the twelve months to March, the CPI rose by 2.6%. This was the biggest gain since August 2018 and followed a 1.7% increase in February.

But the data is unlikely to change Federal Reserve Chairman Jerome Powell’s view that higher inflation in the coming months will be temporary. Powell is scheduled to speak later in the day at the Washington Economic Club.

The “not too high” inflation reading and the relatively successful 30-year U.S. bond auction on Tuesday were the immediate reasons why equity markets won, said François Savary, investment director at Swiss manager Prime Partners.

“Now people are waiting for the earnings season, which should give us more visibility into the outlook and whether the significant market performance we’ve seen is logical and sustainable,” he said.

JPMorgan Chase & Co. and Goldman Sachs Group Inc. are among the U.S. companies that reported this Wednesday.

Deutsche Bank equity strategists expect the S&P 500 earnings to exceed the consensus by 7.5%, well above the historical average of 4%, but lower than in the previous three quarters.

WEAK DOLLAR

For bond markets, the question is whether benchmark yields may break below 1.6% from 1.611% on Wednesday, Westpac strategists wrote in a customer note. “This has been an important technical level, which if broken could see a rapid advance of up to 1.5%,” they said.

The ten-year U.S. Treasury yield rose to a high of 1.776% on March 14 on March 30 on bets that a massive fiscal stimulus would accelerate the U.S. recovery, leading to faster-than-expected inflation. Fed politicians and pushed him to raise interest rates sooner than expected.

But yields have fallen this month, in part because of the Fed’s insistence that the slowdown in the labor market will prevent the economy from heating up.

A range of strong auction results, including Tuesday’s, has also helped tame yields.

Eurozone bond yields, which had been rising in line with U.S. Treasury yields, in hopes of a strong economic recovery later this year and rising inflation, fell Wednesday from 1 to 3 basis points.

The US dollar relaxed along with Treasury yields, which fell to a three-week low against major pairs.

Gold, a traditional hedge against inflation, was flat at $ 1,743.01 an ounce.

Bitcoin hit a record above $ 64,500, expanding the 2021 concentration on the day Coinbase shares should be listed in the United States.

In the oil markets, Brent crude futures rose 1.2% to $ 64.43 a barrel. U.S. crude futures added 1.3% to $ 60.95.