LONDON v SHANGHAI (Reuters) – Global equities were steady 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 maximum of 1 year in the previous session. US futures also suggested a smaller start for Wall Street later that day.
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 in those events helped boost Asian stocks – the Japanese Nikkei added 1.7% – but that disappeared as Europe opened up for business, with the British FTSE 100 and STOXX Europe 600 declining by about 0.5%.
This, in turn, weighed on the MSCI global index, taking it in the red, down 0.1%, although less than 1.5% away from the record level last month.
Biden signed the stimulus legislation before a televised address in which he promised aggressive action to speed up vaccinations and bring the country closer to normal by July 4.
The signing of the US bailout gave new impetus to market sentiment after the European Central Bank said it was ready to speed up the printing of money to keep borrowing costs up, using more generously its € 1.85 trillion emergency purchase program in next month to stop any unwarranted increase in debt financing costs.
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.
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.
In foreign exchange markets, the dollar gained 0.56% against the yen and 0.4% 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 0.4%.
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 added.
Oil prices retreated from sharp gains as the dollar confirmed, with US crude falling 0.3% to $ 65.8 a barrel. Crude oil lost 0.1% to $ 69.54 a barrel.
Spot gold prices fell 0.8% to $ 1,707.7 an ounce.
Reporting by Andrew Galbraith in Shanghai and Matt Scuffham in New York; Edited by Stephen Coates and Jane Merriman