(Reuters) – Global equities held at record highs on Friday, as weaker inflation fears in the United States lowered bond yields and lifted Wall Street, although weakness in Chinese equities capped gains in Asia.
MSCI’s widest measure of global equities set an all-time high earlier in the Asian session and the latter was almost flat.
Japan Topix gained 0.6% and Australian stocks hovered near a more than a year high, while South Korea’s Kospi hit the highest intraday level since mid-February.
Chinese stocks were an outlier, with the CSI 300 slipping 1.5%, pushing the MSCI Ex-Japan Asia Index down 0.6%, as strong domestic inflation data raised concerns about to policy tightening.
Yields on benchmark 10-year Treasuries held close to Thursday’s two-week low of nearly 1.6%, which lifted US tech stocks and propelled the S&P 500 to a record close.
Yields had reached their highest level since January last year, at 1.776% at the end of March, as a series of strong economic data in the United States fueled fears of a spike in inflation which could force the Federal Reserve to raise interest rates sooner than policymakers have done so far. reported.
However, an unexpected increase in the number of Americans filing new unemployment benefits, coupled with Fed Chairman Jerome Powells’ reiteration on Thursday that inflation was not an issue, helped calm this down. nervousness.
Markets seem to have reassured themselves that they may have exaggerated concerns about inflation, and therefore rising interest rates, said Michael McCarthy, chief market strategist at CMC Markets.
Right now, there is no doubt that the sentiment is overwhelmingly positive, and I’m not going to stand in the way of this train.
Powell signaled during an International Monetary Fund event that the central bank is far from reducing support for the US economy, saying that while the economic reopening could cause prices to rise temporarily, it will not constitute inflation. .
Aided by the decline in yields, traders crowded into mega-cap tech stocks such as Apple Inc, Microsoft Corp and Amazon.com Inc, which were the main drivers of the S&P 500.
The S&P 500 gained 0.42% to a record high, while the Nasdaq Composite added 1.03%. Emini futures were mostly flat.
In China, official data on Friday showed factory gate prices rose at their fastest annual rate since July 2018 in March, adding to investors concern that authorities could start to tighten policy.
Basically, the market thinks the Peoples Bank of China is more likely to tighten rather than ease, said Masahiko Loo, a Tokyo-based portfolio manager at AllianceBernstein.
This is very different from the position of the Fed or the Bank of Japan, where they maintain an easing bias.
Meanwhile, the US dollar index, which tracks the greenback against six rivals, held close to Thursday’s two-week low below 92, weighed down by lower Treasury yields.
Spot gold returned to around $ 1,750 an ounce after peaking more than a month at $ 1,758.45 on Thursday.
Crude oil prices were little changed as Wall Streets rallied and the weak dollar offset concern over a sharp rise in gasoline inventories in the United States.
US crude was largely unchanged at $ 59.57 per barrel, while Brent edged down to $ 63.04 per barrel.
Report by Kevin Buckland in Tokyo; Additional reporting by Chibuike Oguh in New York; Editing by Christopher Cushing and Kim Coghill
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