European equities and global equity markets hit new highs, while US, Japanese and European government debt yields fell on Friday as investors embraced loose monetary policies from major central banks.
Investor sentiment in Europe rose after the European Central Bank raised its forecasts for growth and inflation on Thursday and reaffirmed its commitment to continue stimulating the economy. read more
The pan-regional STOXX Europe 600 Index (.STOXX) rose 0.7% to a record close, posting its sixth straight session and its best weekly performance of 1.1% since early May.
The MSCI Countrywide Global Stock Index (.MIWD00000PUS), a benchmark that tracks stocks in 50 countries, set a new intraday high and then fluctuated slightly in the red.
Wall Street stocks hovered around breakeven as investors reoriented their portfolios to tech stocks after Thursday disregarded data that showed annual inflation rose to 5.0% in May.
Growth-Oriented Stocks (.RLG) were slightly ahead of stocks (.RLV) as declines in Treasury yields have confused investors who see signs of inflation more persistent than the Fed’s opinion that a surge in consumer prices will be short-lived …
“You’ve seen the Fed’s position that inflation will be transient, and as inflation declines, you continue to see large bond buyers, which is holding back yields,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles. Angeles.
The inflation data has alarmed many investors, but for now the reaction is that stocks are still preferred over bonds in the face of inflation, said Rick Meckler, partner at Cherry Lane Investments in New Vernon, NJ.
“There are concerns that you might end up with some migration from stocks to bonds,” Meckler said. “But right now, we seem to be at that biased point where bonds are not generating enough yields to scare people away from buying stocks.”
The Dow Jones Industrial Average (.DJI) dropped 0.12%, the S&P 500 (.SPX) added 0.03% and the Nasdaq Composite Index (.IXIC) added 0.18%.
Overnight in Asia, MSCI (.MIAPJ0000PUS), the broadest Asia-Pacific stock index outside Japan, gained 0.3%.
The yield on the 10-year US Treasury bond rose 0.3 basis points to 1.4619% after an earlier decline that was the benchmark for its biggest weekly decline in a year.
Eurozone bond yields followed Treasury bonds. Benchmark German 10-year bonds fell 3 basis points to -0.28% and were identified as the best week of the year. Profitability changes in inverse proportion to prices.
Fewer expectations that higher inflation could lead to early Fed tightening has flattened the US yield curve, with the 10-year to 2-year bond spread being the tightest since late February on Friday.
Yields are likely to rise again as the economy reopens after the coronavirus lockdown.
“We still think consumers will drive prices up when these economies reopen properly and people can travel again, spend again,” said Jeremy Gatto, investment manager at Unigestion.
“We are looking to get additional impetus from the consumption side and therefore expect bond yields to rise.”
The euro and pound fell against the dollar as investors are confident that interest rates in Europe will remain lower.
The dollar index rose 0.54%, the euro fell 0.55% to $ 1.2102. The Japanese yen fell 0.35% against the US dollar to hit 109.70 per dollar.
Oil prices climbed to multi-year highs for a third straight week on the back of improved forecasts for global demand as more vaccinations lift restrictions on the pandemic.
Brent crude oil futures rose 17 cents to $ 72.69 a barrel. US crude oil futures rose 62 cents to $ 70.91 a barrel.
US gold futures fell 0.9% to $ 1,879.6 an ounce.
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