LONDON (Reuters) – European equities rose after a shaky start and the dollar rose on Wednesday as ten-year US Treasury yields fell from ten-month highs, aided by policymakers pushing back against the Fed’s talks support reduced.
After Asian equities made moderate gains, European equities opened lower and then rose slightly, with the pan-European STOXX 600 up 0.2% on the day at 0918 GMT.
The MSCI World Equities Index, which tracks stocks in 49 countries, rose 0.2%, falling to overall highs, and MSCI’s largest European index rose by a similar amount.
China recorded its largest daily jump in COVID-19 cases in more than five months, despite the fact that four cities were in the lock, and the Dutch government said it would extend the closure measures on Tuesday.
Investors are keeping a close eye on the declining debate – that is, the Fed’s possible easing of monetary stimulus.
Several Federal Reserve policy makers, including Loretta Mester, Esther George, James Bullard and Eric Rosengren, have pushed back the Fed’s idea of reducing its asset purchases soon.
These remarks, coupled with a well-received 10-year treasury auction, sent the U.S. 10-year yield down again, away from the 10-month high of 1.187% reached in the previous session.
By 0919 GMT, the standard yield was 1.1189%.
The yield curve, which reached the strongest since May 2017 over expectations for major fiscal stimulus under a new Democratic government, narrowed slightly to 96.8 basis points.
“We believe that the potential of fiscal stimulus, coupled with a normalization of economic activity as the explosion of the vaccine increases, justifies a slightly higher yield from the U.S. Treasury,” UBS strategists wrote in a note to clients.
“In recognition of this, we have increased our U.S. Treasury yield rates by 0.1 percentage points for thirty-ten years to 1.0% and 1.7%, respectively, by the end of December,” they said, adding that they did not yields go much further than that because central banks remain accommodating and the Fed has indicated a tolerance for higher inflation.
In light of the recent yield jump, the US inflation data of December 1330 GMT will be closely monitored.
The US dollar recently broke its downward trend with a three-day winning streak, and began to fall again on Tuesday. It was steady overnight, but began trading in London early on Wednesday, questioning whether the refusal was over.
By 0920 GMT, it was up 0.1% at 90,136 against a basket of currencies.
With at least five Republicans joining Democrats to accuse President Donald Trump of storming the U.S. Capitol, Marshall Gittler, head of investment research at BDSwiss Group, said that to prevent Trump from electing him in the future, the “Trump will permanently remove” premiums “from the dollar and further weaken the currency.”
In Europe, government bond yields have fallen. Italian bonds, which were sold on Tuesday due to political uncertainty, lagged behind Germany.
Data for industrial production in the eurozone for November should be by 1000 GMT.
Against the dollar, the euro was about 0.2% lower at $ 1.21875 at 0920 GMT. Risky currencies such as the Australian and New Zealand dollars also fell as the US dollar rose higher.
Bitcoin rose slightly, but at $ 34,999 it was still about 17% lower than the everyday high of $ 42,000 it reached last week Friday.
The oil price has risen, and it has risen for the seventh day in a row, while US West Texas Intermediate and Brent crude have both been trading at their highest level since February, after operating data showed a larger-than-expected drop in stocks and investors impact of the pandemic.
Reporting by Elizabeth Howcroft, Editing by William Maclean