SYDNEY (Reuters) – Stock markets mixed on Monday as the U.S. Senate raised a $ 1.9 billion stimulus bill for faster global economic growth, but also put new pressure on treasury and technology stocks with high valuations.
The upbeat economic news continued when China’s exports rose 155% in February, compared to a year earlier when a large part of the economy closed down to fight the coronavirus.
“As the Senate progresses, we expect growth momentum to accelerate, and projected global GDP growth to rise to 7.5% year-on-year in the mid-quarters of the year,” JPMorgan economists said in a note.
“Each $ 1 trillion fiscal stimulus contributes up to $ 4- $ 5 at the EPS, which means 6-7% upside down for the rest of the year.”
However, analysts also expected a sharp acceleration in inflation, partly due to the recent rise in oil prices, which is increasing the yields of bonds and increasing the valuation of equities, especially in high technology.
As a result, Nasdaq futures reversed early gains to 1.0%, dropping S&P 500 futures by 0.2%.
MSCI’s broadest index of Asia-Pacific stocks outside Japan followed a decline of 0.5%, while Chinese blue chips rose 0.9%.
Japan’s Nikkei held on to a gain of 0.2%, while EUROSTOXX 50 futures continued to rise by 0.8% and FTSE futures by 0.9 %%.
Investors in equities helped the US data showing that the non-farming payroll rose by 379,000 jobs last month, while the unemployment rate fell to 6.2% in a positive sign for income, spending and corporate earnings.
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 1,625% following the data, and it was 1.59% on Monday. 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 talks that it will protest against the recent rise in eurozone yields and perhaps fraudulent ways to curb further increases.
The divergent rate of return raised the dollar to the euro, which fell to a low of $ 1.1892 in three months and was last set at $ 1.1904.
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 jumped sharply to levels not seen since the end of November and was last at 92,057, well above the recent trough of 89,677.
It also rose on the low-yield yen, reaching a nine-month high of 108.63, and last changed at 108.41.
The rise in yields weighed on gold, offering no fixed yield, leaving it at $ 1,705 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 $ 1.44 a barrel to $ 70.80, while U.S. crude rose $ 1.36 to $ 67.45 a barrel.
Reporting by Wayne Cole; Edited by Sam Holmes