LONDON (Reuters) – European equities rose after a shaky start and the dollar rose on Wednesday, while the yield on the 10-year US Treasury fell from 10-month highs, helped by political decision-makers pushing back talks on that the Fed is reducing its support.
After Asian stocks gained modest gains, European stocks opened less than slightly higher, with the pan-European STOXX 600 up 0.2% on 0918 GMT.
The MSCI World Capital Index, which tracks stocks in 49 countries, rose 0.2% to a record high, and the main European MSCI index rose a similar amount.
China has seen the biggest daily jump in COVID-19 cases in more than five months, despite the fact that four cities are blocked, and the Dutch government said it would extend the blocking measures on Tuesday.
Investors are closely following the discussion about reducing the content – that is, the possible relaxation of the monetary stimulus by the Fed.
Several Federal Reserve policy makers, including Loretta Mester, Esther George, James Bullard and Eric Rosengren, pushed back the idea that the Fed would soon reduce its asset purchases.
These comments, along with a well-received 10-year treasury bid, pushed the 10-year US yield back down, far from the 10-month high of 1.187% reached in the previous session.
At 0919 GMT, the reference yield was 1.1189%.
The yield curve, which peaked in May 2017 in terms of expectations for large fiscal incentives in a new democratic administration, fell slightly to 96.8 basis points.
“We believe that the potential for fiscal stimulus, along with a normalization of economic activity as vaccine launches increase, justifies slightly higher U.S. Treasury yields,” UBS strategists wrote in a note to clients.
“To acknowledge this, we raised our 10- and 30-year US Treasury yield forecasts by 0.1 percentage points this year to 1.0% and 1.7%, respectively, by the end of December. They said, adding that yield depletion is not expected to go much further as central banks remain accommodative and the Fed has signaled a tolerance for higher inflation.
Given the recent rise in yields, December US inflation data, due at 1330 GMT, will be closely monitored.
The US dollar recently broke its downward trend with a three-day winning streak, then resumed falling on Tuesday. He was steady overnight, but began trading in London on Wednesday, questioning whether his kiss was over.
At 0920 GMT, it rose 0.1% to 90.136 against a basket of currencies.
With at least five Republicans joining Democrats, pressure to charge President Donald Trump for the assault on the US Capitol, Marshall Gittler, head of investment research at BDSwiss Group, said preventing Trump from running for office in the future would “remove” “Trump first” in the dollar and allows the currency to weaken further. “
In Europe, government bond yields have fallen. Italian bonds, which sold on Tuesday due to political uncertainty, lagged behind Germany.
Data on industrial production in the euro area for November are due at 1000 GMT.
Compared to the dollar, the euro fell about 0.2% to $ 1.21875 at 0920 GMT. Riskier currencies, such as the Australian dollar and the New Zealand dollar, have also declined as the US dollar has risen.
Bitcoin rose slightly, but, by $ 34,999, fell another 17% from the all-time high of $ 42,000 it hit on Friday last week.
Oil prices rose, gaining for the seventh day in a row, with both the British US West Texas Intermediate and Brent trading at their highest level since February, after industry data showed a larger-than-expected decline in stocks and investors given up on the impact of the pandemic.
Reported by Elizabeth Howcroft, edited by William Maclean