Global actions, oil moves away from highs as the stimulus increases

LONDON (Reuters) – Global equities were fixed on Friday, but at a record high, while oil fell as benchmark debt yields rose, helping to reduce the last stimulus rally.

Earnings in the Asian stock markets proved difficult to match for most European counterparts, reaching a one-year high the day before. Wall Street also looks set to open lower, with S&P 500 futures down 0.5%.

The cautionary note followed the signing on Thursday of a $ 1.9 trillion US stimulus bill and a new European Central Bank tilt that led to a decline in bond yields and eased global concerns about rising inflation.

The explosion of market optimism at these events helped boost Asian stocks – the Japanese Nikkei added 1.7% – but that disappeared with the opening of Europe for business, with STOXX Europe 600 down about 0.6%.

This, in turn, weighed on the MSCI World index, taking it in the red, down 0.2%, although less than 1.5% away from the record level last month.

“We have recently seen some irregular market movements between asset classes, as well as in 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 giving a televised address in which he promised aggressive actions to speed up vaccinations and bring the country closer to normal by July 4.

Earlier, the European Central Bank said it was ready to speed up the printing of money to keep the loan cover.

“European fixed income is likely to exceed as sovereign curves, especially in the periphery, flatten out and the gap between the US and European interest rate curves widens,” said Nordea analyst Sebastien Galy.

Against the backdrop of this extremely weak monetary policy, analysts are largely expecting inflation to return, as vaccine launches lead to a reopening, leading to concerns that Biden’s stimulus package could overheat the economy.

“If inflation remains limited to low levels, then there will be little pressure on the Federal Reserve to raise rates and in such a scenario, robust growth and abundant liquidity could continue to drive markets higher,” said Mark Dowding. , CIO and BlueBay Asset Management.

“However, if inflation moves upwards, then bond yields and policy rates will increase and this can create a much more challenging market dynamic.”

US Treasury yields for 10 years rose again on Friday, back more than 1.6% and on the road to growth for the seventh consecutive week.

Given market movements, all eyes will be on the next US Federal Reserve meeting next week to provide clues as to its views on rising yields and the threat of inflation.

In foreign exchange markets, the dollar gained 0.5% against the yen and 0.1% against the euro and the pound sterling, although the latter was helped by news that the economy contracted less than expected in January.

Meanwhile, the dollar index, which tracks the US currency against a basket of six major rivals, rose 0.5%.

Markets are likely to remain volatile in the second quarter, especially for the dollar, which was much stronger than expected earlier this year, said Cliff Zhao, chief strategist at China Construction Bank International.

“So I think the strong US dollar could affect some liquidity conditions in emerging markets,” he said.

Oil prices retreated as the dollar gained, with US oil falling 0.5% to $ 65.68 a barrel. Crude brent lost 0.5% to $ 69.27 a barrel.

Spot gold prices fell 1.1% to $ 1,702.9 an ounce.