LONDON (Reuters) – Global equities remained flat on Friday, but in the face of a record high as oil fell as benchmark debt yields rose, helping to slow last stimulus-driven rally.
Earnings in the Asian stock markets proved difficult to match for most European teams, having reached a one-year high the day before. Wall Street also looks set to open lower, with S&P 500 futures down 0.5%.
The cautionary note followed the signing of a $ 1.9 trillion US stimulus bill on Thursday and a new European Central Bank inclination that had led to a withdrawal of US stimulus yields. good and eased global concerns about rising inflation.
The outbreak of market optimism at these events had helped boost Asian stocks (the Japanese Nikkei added 1.7%), but faded when Europe opened business, with the STOXX Europe 600 in the spotlight. down around 0.6%.
This, in turn, weighed on the MSCI World index, which was in the red, 0.2% lower, although less than 1.5% of last month’s record high. .
“We have recently seen some erratic market movements between asset classes, as well as within the sectors and styles of the equity market. Therefore, a period of digestion seems logical and healthy, “Barclays analyst Emmanuel Cau said in a note.
Biden had signed the stimulus legislation before delivering a televised speech in which he pledged to take aggressive measures to speed up vaccinations and bring the country back to normal on 4 July.
Earlier, the European Central Bank had said it was willing to speed up the printing of money to avoid borrowing costs.
“The odds are that European fixed income will rise as sovereign curves, especially on the periphery, flatten out and that the gap between the US and European interest rate curve will widen,” he said. Nordea analyst Sebastien Galy.
In this context of very weak monetary policy, analysts largely expect inflation to rise as vaccine deployment leads to reopening, raising concerns that the Biden stimulus package could overheat the economy.
“If inflation remains contained at low levels, there will be little pressure on the Federal Reserve to raise rates, and in this scenario, robust growth and abundant liquidity may continue to push markets higher,” Mark said. Dowding, CIO of BlueBay Asset Management.
“However, if inflation evolves upwards, then bond yields and policy rates will increase and this can create a much more difficult market dynamic.”
Ten-year U.S. Treasury yields rose again on Friday, up 1.6% and on track to rise for the seventh consecutive week.
Given market movements, all eyes will be on the upcoming U.S. Federal Reserve meeting next week for clues to their views on rising yields and the threat of inflation.
In the foreign exchange markets, the dollar gained 0.5% against the yen and 0.1% against the euro and the pound sterling, although the latter was helped by news that the economy was had hired less than expected in January.
Meanwhile, the dollar index, which tracks the U.S. currency against a basket of six major rivals, rose 0.5%.
Markets are likely to remain volatile in the second quarter, mostly due to the dollar, which was much stronger than expected earlier this year, said Cliff Zhao, chief strategist at China Construction Bank International.
“So I think the strong U.S. dollar may affect some liquidity conditions in emerging markets,” he said.
Oil prices retreated as the dollar gained, with U.S. crude falling 0.5% to $ 65.68 a barrel. Brent crude lost 0.5% to $ 69.27 a barrel.
Spot gold prices fell 1.1% to $ 1,702.9 an ounce.
Additional reports by Andrew Galbraith in Shanghai and Saikat Chatterjee in London; edited by Jane Merriman, Larry King