Global stocks reach two-week high as inflation concerns ease

by Jonathan Adams
Global stocks

The Dow Jones Industrial Average advanced 0.87%, to 32,579.49, the S&P 500 added 1.11%, to 3,941.97 and the Nasdaq Composite gained 2.05%, to 13,336.43

Global stocks advanced for a third session in a row on Thursday to reach its highest level in two weeks, as a drop in government bond yields helped ease inflation concerns and provided a boost to stocks.

Euro zone bond yields dropped after the European Central Bank (ECB) said it was ready to accelerate money-printing to keep check euro zone borrowing costs, using its 1.85 trillion Pandemic Emergency Purchase Program (PEPP) more generously over the coming months to stop any unwarranted increase in debt financing costs.

Germany’s 10-year government bond yield last rose 8/32 in price to yield -0.334%, after hitting as low as -0.367, its lowest since Feb. 18, and further away from the near one-year high of -0.203% in late February.

Yields on the benchmark 10-year Treasury dropped as low as 1.475%, the first time it had dropped below 1.5% in a week before edging higher.

On Wall Street, the easing inflation concern helped equities, with the technology sector leading the gains, up 2.02%. Expensive stocks, many of which are in the tech sector, have been highly sensitive to the rise in yields.

In contrast, bank stocks only gained 0.13%.

The inflation scare that we saw last week has subsided as bond yields calm down, said Art Hogan, chief market strategist at National Securities in New York. The market sentiment is turning more optimistic as we get better results from (COVID-19) vaccines that help towards a faster pace of herd immunity.

The Dow Jones Industrial Average advanced 282.47 points, or 0.87%, to 32,579.49, the S&P 500 added 43.16 points, or 1.11%, to 3,941.97 and the Nasdaq Composite gained 267.60 points, or 2.05%, to 13,336.43.

Sentiment was also bolstered by weekly jobless claims data, which indicated a recovering U.S. labour market as vaccine rollouts lead to economic reopenings.

Benchmark 10-year notes last fell 5/32 in price to yield 1.5352%, up from 1.52% late on Wednesday.

Investors will now eye an auction of 30-year debt on Thursday, seeking to cover massive shorts. A weak seven-year auction in late February fuelled inflation concerns, sending yields higher.

European stocks jumped, with the pan-European STOXX 600 index hitting a one-year high and on track for its fourth consecutive day of gains. The STOXX 600 index gained 0.46% and MSCI’s gauge of stocks across the globe advanced 1.27%.

Analysts largely expect inflation to pick up as vaccine rollouts lead to a reopening of the economy, but concerns persist that the $1.9 trillion coronavirus relief package set to be signed by U.S. President Joe Biden could overheat the economy.

This article is for information purposes only.
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