MILAN / SYDNEY (Reuters) – World equities fell on Monday as the US Senate placed a $ 1.9 billion stimulus bill on $ 1.9 billion, with a high valuation placing the treasury and technology stocks, which pushed inflation fluctuations have increased.
These concerns overshadow the prospect of stimulus the world’s no. 1 economy will give another boost, which will probably help to accelerate global growth faster due to the COVID-19 downturn.
Analysts expect a sharp acceleration in inflation, partly fueled by the recent rise in oil prices, which climbed to above $ 70 on Monday for the first time since the pandemic.
“Between reflections, inflation risk and stock valuations, there are many reasons for the market to be uneasy about the price repossession,” says Natixis’ strategist Florent Pochon.
“Equity valuations will, of course, remain a burning issue, especially for excessively wealthy sectors,” he also said, adding that sell-offs should be seen as buying opportunities as central banks remain “structurally dull”.
The MSCI World Stock Index < .MIWD00000PUS> fell 0.1% at 0828 GMT, as gains in European cyclical and travel stocks were offset by losses in Asia.
Chinese stocks fell their biggest drop in seven months by 3.5%, due to concerns that Chinese officials could tighten policies to curb high valuations.
Nasdaq futures fell 2% in early European trading, reversing early gains, while S&P 500 futures fell 1% as investors looked past the benefits of the fiscal package.
According to JPMorgan, each $ 1 billion fiscal stimulus contributes about $ 4- $ 5 to corporate earnings, rising 6-7% for the rest of the year.
Investors in shares gained heart on Friday from US data showing that non-farm salaries rose by 379,000 jobs last month, while the unemployment rate fell to 6.2%, which is a positive sign for income, spending and corporate earnings were.
U.S. Treasury Secretary Janet Yellen tried to counter inflation problems by noting that the real unemployment rate was closer to 10% and that there was still a lot of slack in the labor market.
Yet yields on U.S. ten-year treasury still reached a one-year high of 1,626% following the data, and it was 1,594% on Monday.
US yields rose by a solid 16 basis points for the week, while German yields actually fell 4 basis points.
The European Central Bank is meeting on Thursday amid discussions to look at ways to curb further rises in eurozone yields.
The divergent rate of return strengthened the dollar against the euro, which fell to a three-month low of $ 1.1891.
Athanasios Vamvakidis, an analyst at BofA, argued that the powerful mix of US stimulus, faster reopening and greater consumer firepower was a clear positive factor for the dollar.
“Including the current proposed stimulus package and further upwards as a bill on the second half of the infrastructure, the total fiscal support of the US is six times greater than the EU recovery fund,” he said. “The Fed also supports the US money supply growing twice as fast as the Eurozone.”
The dollar index rose to levels not seen since the end of November and was last at 92.06, well above the February trough of 89,677.
The US currency also rose on the low-yielding yen, reaching its nine-month high of 108.63 and was last changed hands at 108.4.
The rise in yields weighed on gold, which offers no fixed yield, pushing it up 0.1% to $ 1,698 per ounce and just above a nine-month low.
Oil prices were at their highest levels in more than a year after Yemen’s Houthi forces fired on drones and missiles at the core of Saudi Arabia’s oil industry on Sunday, raising concerns about production.
The prices were already supported by a decision by OPEC and its allies not to increase supply in April. [O/R]
Brent rose 1.1% to $ 70.14 a barrel, while US crude rose 1% to $ 66.8 a barrel.
Reporting by Danilo Masoni and Wayne Cole; Edited by Alex Richardson