LONDON (Reuters) – World equities were flat on Friday, but within sight of a record high, while oil rose as norm yields rose, helping to curb the latest stimulus-driven rise.
The gains in the Asian stock markets were difficult to match most European peers, having peaked at a one-year high the previous day. Wall Street also looks for a lower open, with S&P 500 futures up 0.5%.
The warning follows the signing of a $ 1.9 billion US stimulus bill on Thursday and a further tilt of the European Central Bank, which had a pullback in yields and eased global concerns about rising inflation has.
The outburst of market optimism of these events helped Asian stocks rise – the Japanese Nikkei added 1.7% – but it disappeared as Europe started for business, with the STOXX Europe 600 up about 0.6%.
It in turn weighed the MSCI world index and took it in the red percentage, with 0.2%, although it was less than 1.5% from the record high last month.
‘We have recently seen a number of volatile market movements across asset classes, as well as within stock market sectors and styles. A period of digestion therefore seems logical and healthy, “Barclays analyst Emmanuel Cau said in a note.
Biden signed the stimulus legislation before delivering a television address in which he promised aggressive action to speed up vaccinations and move the country closer to normalcy by 4 July.
Earlier, the European Central Bank said it was ready to print money to cover borrowing costs.
“The chances are that European fixed income will outperform sovereign curves, especially in the periphery, and that the spread between the US and European interest rate curves will increase,” said Nordea analyst Sebastien Galy.
Against the backdrop of a loose monetary policy, analysts expect inflation to increase largely as vaccine rollout leads to a reopening, leading to concerns that Biden’s stimulus package could overheat the economy.
“If inflation is limited at low levels, there will be little pressure on the Federal Reserve to raise rates, and in such a scenario, strong growth and abundant liquidity could continue to increase markets,” said Mark Dowding, CIO of BlueBay Asset Management , said. .
“However, if inflation trends upwards, the rate of return and policy rates will rise and this could create a much more challenging market dynamic.”
US ten-year treasury yields rose again on Friday, above 1.6%, and on track for the seventh consecutive week.
Given the market movements, all eyes will be on the next meeting of the US Federal Reserve next week for clues for its view on rising yields and the threat of inflation.
In foreign exchange markets, the dollar rose 0.5% against the yen and 0.1% against the euro and pound, although the news was helped by the news that the economy contracted less in January than expected.
The dollar index, which tracks the US currency against a basket of six major competitors, rose 0.5%.
The markets are likely to remain volatile in the second quarter, especially for the dollar, which was much stronger than expected at the beginning of the year, said Cliff Zhao, chief strategist at China Construction Bank International.
“I therefore think that the strong US dollar may weigh on certain liquidity conditions in emerging markets,” he said.
The oil price retreated as the dollar rose, with US oil falling 0.5% to $ 65.68 a barrel. Brent crude oil lost 0.5% to $ 69.27 a barrel.
Spot gold prices fell 1.1% to $ 1,702.9 per ounce.
Additional reporting by Andrew Galbraith in Shanghai and Saikat Chatterjee in London; Edited by Jane Merriman, Larry King