A stock rally, fueled by hopes of a quick recovery in global economic growth, stalled Wednesday a day after Europe’s benchmark index canceled out losses from the pandemic.
The Wall Street S&P 500 index rose 0.2% to close at a new all-time high, while the Nasdaq Composite fell 0.1%.
The yield on 10-year US Treasuries, an important benchmark for global borrowing, rose 0.01 percentage points to about 1.67 percent after details of the latest Federal Reserve monetary policy meeting showed policymakers largely dismissed concerns. that inflation will skyrocket.
The Fed’s commitment to support the economy until the recovery picks up steam, along with President Joe Biden’s multimillion-dollar stimulus plans to boost the economy, have raised investor expectations for the pace of economic recovery, but also raised fears of a possible surge in inflation.
Politicians at the US central bank have made it clear that they will continue to buy assets until the labor market is healed of the pandemic.
“We appreciate their willingness to see real improvement in economic data rather than proactively adjusting policy based on better forecasts, but reluctance to acknowledge the extent of the improvement looks increasingly problematic,” said Bob Miller, America’s head of fundamental fixed income for BlackRock.
Several market measures have shown that investors are nevertheless pricing interest rate hikes earlier than officials said.
“The market is on hold,” said Emmanuel Cau, head of European equity strategy at Barclays, as traders expect stocks to rise substantially in the first quarter. “The bar for pleasant surprises is rising because people are in the mood for good news.”
The Continental Stoxx Europe 600 Index declined 0.2% after surpassing the February 2020 high and offsetting losses from the pandemic the day before.
In addition to the UK stock markets, stock indices in the region as a whole closed the day with a decline. London’s FTSE 100 rose 0.9%, while the mid-cap FTSE 250, which is more focused on domestic companies, climbed 0.8% to a record high.
“The FTSE 250 is on a wave of optimism as the UK prepares for life after the lockdown,” said Danny Hewson, financial analyst at AJ Bell. The deployment of the vaccine in the country, coupled with its roadmap for getting out of isolation, “reinforced the belief that recovery will be sustainable this time around,” Hewson said.
Equities in Europe have also been converted to value stocks, which are well represented in the continent’s major indices.
But while so-called value investments have outpaced fast-growing companies this year, the gap between them has narrowed in recent days.
Diane Jaffee, portfolio manager at TCW, noted that the recent trading fiasco around Archegos Capital Management has pushed some investors away from securities that have surged this year. Archegos used large amounts of leverage to trade the likes of ViacomCBS and Discovery, recharging stocks for a while before they finally crashed at the end of March.
“This uncertainty creates a small impetus for tried and tested development,” she said. “I think investors got a little nervous about what was unclear what was real or what was leveraged and decided to go back to traditional growth stocks until they really get a feel for what was happening to the company’s earnings.”
Shares of Microsoft, Amazon and Alphabet, which owns Google, have risen more than 5% since the beginning of the month.
Markets in Asia showed a mixed session, with Japanese Topix and Australian S & P / ASX 200 gaining 0.7% and 0.6%, respectively. Shares in Shanghai mainland China fell 0.7% and Hong Kong’s Hang Seng fell 0.9%.
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