Stocks Rise, Dollar Relaxes on U.S. Rate Outlook
Global stocks pushed higher on Tuesday and the dollar fell to nearly three months, betting that U.S. interest rates would stay low helped investors look past the rise in COVID-19 infections in Asia.
Stocks in Europe rose in morning trading, with regional benchmark STOXX 600 (.STOXX) closing in on previous record high, up 0.5%, while Wall Street looked poised to follow with contracts S&P 500 futures gaining nearly 0.4%.
The largest MSCI index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) rose 1.6% as it recouped some of the losses suffered recently after new cases of the coronavirus prompted some economies to impose new antivirus restrictions.
The MSCI indicator for stocks across the world (.MIWD00000PUS) was up 0.5% at 8:10 a.m. GMT.
Market volatility has increased in recent weeks amid concerns that abundant stimulus and mounting inflationary pressures in the United States could force the Federal Reserve to reduce support to prevent the world’s largest economy from overheating.
“Typing talk is the new cone,” said Mike Kelly, multi-asset manager at PineBridge Investments.
“Structural inflation is still a long way off but the temporary supply-side bottlenecks will last until at least September. The Fed will try to work its way through and the markets will be frustrated. But the more inflation overshoots will be. are temporary, the harder it will be to do so. Avoid frayed conversations, “he added.
But comments by Fed Vice Chairman Richard Clarida on Monday, who pointed to the weakness of the April jobs report as evidence of the slowing economy, and other Fed policymakers helped reassure the markets that US monetary policy will remain easy.
“In short, the Fed’s music is still the same. It’s not yet time to hit the nail on the head, and it won’t be for a while,” said Giuseppe Sersale, fund manager at Anthilia in Milan.
Their comments came ahead of the release on Wednesday of the minutes of the Fed’s policy meeting last month, which will be closely watched for any indication of the direction of monetary policy this year.
Markets also ignored data showing Japan’s economy shrank more than expected in the first quarter as slow vaccine deployment and new COVID-19 infections affected spending.
Japan’s Nikkei (.N225) rose 2.3%, while shares of Taiwan (.TWII), which is experiencing a spike in cases, rose 4.7% on news the country is in talks with the United States for a share of the vaccine doses Washington plans to send overseas. Read more
Goldman Sachs economists see delays in the global vaccine supply as temporary and expect around half of the world’s population to be vaccinated by the end of 2021.
The dollar hit a six-year low against the Canadian dollar and swung near multi-month lows against European currencies, as Treasuries yields stagnated amid new expectations that the U.S. United will not be raising interest rates anytime soon.
The dollar traded at $ 1.2202 against the euro, its lowest since February 25. The Canadian dollar rose to a six-year high of C $ 1.2030 against the greenback, helped by higher crude oil prices.
The dollar index fell 0.4% to its lowest since February 25.
Yields on 10-year US Treasuries were little changed at 1.651%.
Spot gold rose 0.2% to $ 1,869.9 an ounce, a three-and-a-half-month high as a weaker US dollar and mounting inflationary pressure boosted the metal’s appeal in as a hedge against inflation.
The weak dollar also contributed to the rise in copper prices, while zinc prices in Shanghai climbed 6.1% to their highest level in more than 13 years due to supply issues in China. .
Oil prices have risen, with Brent and West Texas Intermediate (WTI) both rising about 0.9% on expectations of stronger fuel demand as the US and European economies reopen.
Bitcoin rose 3.5%, offsetting some of its large losses since Tesla (TSLA.O) boss Elon Musk said he would stop taking bitcoin as a payment due to environmental concerns. Ether jumped 6.7%.
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