MILAN v SYDNEY (Reuters) – Global equities fell on Monday as the US Senate’s $ 1.9 trillion stimulus bill put fresh pressure on the Treasury and high-tech stocks, boosting inflation. .
These concerns overshadowed the prospect that the stimulus would give a new impetus to the economy no. 1 of the world, probably helping global growth to recover faster from the COVID-19 recession.
Analysts expect a sharp acceleration in inflation, partly caused by the latest rise in oil prices, which on Monday rose to more than $ 70 for the first time since the beginning of the pandemic.
“Between inflation, inflation risk and equity valuations, there are a lot of reasons for the market to be nervous about the revaluation of bonds,” said Natixis strategist Florent Pochon.
“Equity valuations will, of course, remain a hot issue, especially for the excessively wealthy sectors,” he said, adding that sales should be seen as buying opportunities, as central banks remain “structurally corrupt.” .
MSCI World Capital Index < .MIWD00000PUS> decreased by 0.1% to 0828 GMT, as gains from European cyclical and travel stocks were offset by losses in Asia.
Chinese stocks have declined the most in the past seven months, down 3.5% due to concerns that Chinese officials could tighten policy to limit higher valuations.
Nasdaq futures fell 2% at the start of European trading, reversing early gains, while S&P 500 futures fell 1% as investors outweighed the benefits of the fiscal package.
According to JPMorgan, each $ 1 trillion tax incentive adds about $ 4-5 to the companies’ earnings per share, which means a 6-7% increase for the rest of the year.
Stock investors on Friday were concerned about U.S. data showing non-farm wages rose 379,000 jobs last month, while the unemployment rate fell to 6.2% in a positive sign for income, spending and earnings corporate.
US Treasury Secretary Janet Yellen tried to counter inflation concerns, noting that the real unemployment rate was approaching 10% and that there was still a lot of weakness in the labor market.
However, the yields of the US Treasury for 10 years reached another one-year high of 1.626% as a result of the data, and stood at 1.594% on Monday.
US yields rose 16 basis points in the week, while German yields fell 4 basis points.
The European Central Bank will meet on Thursday to discuss ways to restrict further increases in eurozone yields.
The divergent trajectory of yields stimulated the dollar against the euro, which fell to a three-month low of $ 1.1891.
BofA analyst Athanasios Vamvakidis argued that the strong mix of US stimulus, faster reopening and higher firepower for consumers was a clear positive for the dollar.
“Including the current proposed stimulus package and an addition to an infrastructure bill in the second half, total US fiscal support is six times higher than the EU’s recovery fund,” he said. “The Fed also supports the growth of the US money supply twice as fast as the euro area.”
The dollar index rose to unprecedented levels since the end of November and was last at 92.06, well above the February low of 89,677.
The US currency also gained on the low-yielding yen, hitting a nine-month high of 108.63 and changing hands last time to 108.4.
Yield growth weighed on gold, which offers no fixed return, and pushed it down 0.1% to $ 1,698 an ounce and even over the nine-month low.
Oil prices have risen to their highest levels in more than a year after Yemen’s Houthi forces launched drones and missiles into the heart of Saudi Arabia’s oil industry on Sunday, raising concerns about production.
Prices had already been supported by a decision by OPEC and its allies not to increase supply in April. [O/R]
Brent rose 1.1% to $ 70.14 a barrel, while US crude rose 1% to $ 66.8 a barrel.
Reporting by Danilo Masoni and Wayne Cole; Edited by Alex Richardson