TOKYO (Reuters) – Global stock markets rose to a record high on Wednesday as bond yields fell after data showed US inflation was not rising wildly as the economy reopened.
Most of the Asia-Pacific stock indexes followed Wall Street higher, and Hong Kong’s Hang Seng gained in the region, while US Treasury benchmark yields continued to decline, marking a new three-week high.
The S&P 500 futures indicated an additional 0.1% increase.
Japan dropped the trend, with the Nikkei falling 0.3% as rising cases of coronavirus raised doubts about its economic recovery 100 days before Tokyo is scheduled to host the Olympics.
European equities appear to open slightly higher, with Euro Stoxx futures up 0.3% and British FTSE futures up 0.1%.
The US consumer price index rose 0.6%, the biggest increase since August 2012, as rising vaccinations and fiscal incentives triggered accumulated demand. But the data is unlikely to change Federal Reserve Chairman Jerome Powell’s view that higher inflation in the coming months will be temporary.
Powell is scheduled to speak later in the day at the Economic Club in Washington.
“The market has clearly prepared for higher CPI values,” Westpac strategists wrote in a note to customers.
They said Tuesday’s result was “clearly interpreted in the context of the Fed’s commitment to look at ‘transient’ inflation impulses.”
For bond markets, the question is whether the benchmark yield may fall below 1.6% from at least 1.611% on Wednesday, they wrote.
“This was an important technical level, which, if defective, could see a rapid move to 1.5%.”
The U.S. Treasury’s 10-year yield has risen since the beginning of the year to a 14-month high of 1.776% on March 30, on bets that the massive fiscal stimulus would accelerate the U.S. recovery, causing inflation faster than policymakers anticipate. The Fed is determined to raise interest rates sooner than expected.
But yields declined this month, in part because of the Fed’s insistence that a weakening labor market will prevent the economy from overheating.
A series of strong auction results, including 30-year bonds on Tuesday, also helped boost yields. [US/]
The largest MSCI index of Asia-Pacific equities outside Japan rose 0.8%. Hong Kong’s Hang Seng rose 1.4%, while China’s blue-chip index gained 0.5%.
MSCI’s range of stock performance in 50 countries advanced 0.2%, renewing its all-time high.
“Once again, the markets are on the bright side, and despite this higher-than-expected inflation, it has been interpreted as a sign of better growth,” said Michael McCarthy, chief market strategist at CMC Markets.
“We have seen support for high-growth technology and other sectors exposed to economic growth, including financial.”
Declining bond yields lifted US technology stocks overnight, including Apple Inc., Microsoft Corp. and Amazon.com Inc., the top three global benchmark holdings.
The S&P 500 gained 0.33% as it also set daytime highs and a record high, while the Nasdaq Composite added 1.05%. The Dow Jones industrial average fell 0.2%.
Johnson & Johnson shares fell 1.34% after US federal health agencies recommended stopping the COVID-19 vaccine for at least a few days after six women developed rare blood clots. The failures of vaccination launches have raised concerns about the global economic recovery.
Earnings will focus on Wednesday with JPMorgan Chase & Co. and Goldman Sachs Group Inc. among the reporting companies.
The US dollar fell with Treasury yields, slipping to a three-week low for key colleagues. [FRX/]
Gold, a traditional hedge for inflation, has expanded its growth from the lowest in more than a week to trade around $ 1,742 on the spot market.
Bitcoin hit a record $ 64,500, extending the 2021 rally to new heights on the day Coinbase shares are listed in the United States.
In the oil markets, Brent crude futures rose 47 cents to $ 64.14 a barrel. US gross futures added 47 cents to $ 60.65.
Reporting by Kevin Buckland; Additional reporting by Herbert Lash; Editing by Ana Nicolaci da Costa and Kim Coghill