LONDON / TOKYO (Reuters) – Global stock markets rose to a record high on Wednesday as yields fell, after data showed that US inflation was not rising too fast as the economy recovered.
Fearing that a strong inflation reading could now dampen the accommodative stance of the Federal Reserve, European equities opened 0.1% higher.
The profit was limited after Johnson & Johnson said it would delay the roll-out of its COVID-19 vaccine to Europe, after U.S. health officials recommended stopping its use in the country after six women had rare blood clots.
Led by Hong Kong’s Hang Seng, most indices in Asia and the Pacific also climbed.
U.S. Treasury benchmark returns continued their decline, which was a fresh three-week low.
S&P 500 futures showed a further increase of 0.1% after the S&P 500 closed at record highs on Tuesday.
Japan countered the trend, while the Nikkei fell 0.4% as an increasing number of cases of coronavirus raised doubts about its economic recovery, with another 100 days too long until Tokyo hosted the Olympics.
The MSCI benchmark in 50 countries rose 0.2% to a record high.
The US consumer price index rose 0.6% in March, the biggest increase since August 2012, as increasing vaccinations and fiscal stimulus triggered pent-up demand, data showed on Tuesday. Economists polled by Reuters predicted that the CPI would rise by 0.5%.
In the twelve months to March, the CPI rose by 2.6%. This was the largest increase since August 2018 and followed a rise of 1.7% in February.
But the data is unlikely to change the view of Federal Reserve Jerome Powell that higher inflation will be short-lived in the coming months. Powell will speak at the Economic Club in Washington later that day.
The ‘not too high’ inflation reading and a relatively successful 30-year US auction on Tuesday were the immediate reason for acquiring stock markets, said François Savary, chief investment officer of Swiss wealth manager Prime Partners.
“People are now waiting for a earnings season, which should make us more visible about the prospects and whether the significant performance in the market is logical and sustainable,” he said.
JPMorgan Chase & Co. and Goldman Sachs Group Inc are among U.S. companies reported Wednesday.
Deutsche Bank’s equity strategists expect S&P 500 earnings to be 7.5% above consensus, well above the historical average of 4%, but lower than in the previous three quarters.
SWAKER DOLLAR
For bond markets, the question is whether the benchmark yield could break below 1.6% from as low as 1.611% on Wednesday, Westpac strategists wrote in a customer service. “It was an important technical level, which, if broken, could move quickly to 1.5%,” they said.
Ten-year US Treasury yields rose to a 14-month high of 1.776% on March 30 on bets that massive fiscal stimulus would accelerate a recovery in the US, which would yield faster inflation than Fed policymakers predicted, and led to it raising interest rates as expected.
But yields eased this month, in part because of the Fed’s insistence that the economy not overheat.
A spate of strong auction results, including Tuesday, also helped tame the returns.
Eurozone bond yields, which rose in line with U.S. Treasury yields in hopes of a strong economic recovery later this year and rising inflation, fell by 1 to 3 basis points on Wednesday.
The US dollar declined along with Treasury yields, and it dropped to a three-week low against major peers.
Gold, a traditional inflation hedge, was $ 1,743.01 an ounce.
Bitcoin reached a record high of more than $ 64,500, expanding its rally in 2021 on the day Coinbase shares would appear 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.
Reporting by Tom Arnold and Kevin Buckland; additional reporting by Herbert Lash; Edited by Ana Nicolaci da Costa, Kim Coghill, Larry King