World stock markets finish near record highs

by Jonathan Adams
MSCI

MSCI’s all-country world index finished 0.2% lower, at 715.57, the STOXX Europe 600 index advanced 0.1 per cent, FTSE dropped 0.2 per cent

World stock markets finished near record highs and US bond yields dropped yesterday as some of US President Joe Biden’s stimulus efforts appeared to be on the rocks, boosting the appeal of technology stocks as inflation pressures ease.

A ruling by Senate parliamentarian Elizabeth MacDonough in May said Democrats can only use “reconciliation” once in a fiscal year to circumvent legislation that requires 60 votes. Democrats passed Biden’s US$1.9 trillion pandemic relief package in March through reconciliation.

Democratic fiscal packages in Congress are rapidly shrinking, leading to a net outcome that inflationary pressures are set to recede, said Sebastien Galy, senior macro strategist at Nordea Asset Management.

The yield on benchmark 10-year US Treasury notes dropped 3.9 basis points to 1.4891 per cent, down from 1.528 per cent late on Tuesday.

Yields plunged as traders in part were forced to unwind short positions in Treasuries, said Joe LaVorgna, chief economist of the Americas at Natixis.

More importantly, the economy is at its peak growth and a lot of what the Biden administration wants to do in terms of fiscal stimulus may not be met because of the parliamentarian ruling, LaVorgna said.

MSCI’s all-country world index finished 0.2% lower, at 715.57, less than 3 points from its record peak on Tuesday.

On Wall Street, the S&P 500 came within 1 point of its all-time high set in May as big tech rallied along with healthcare stocks.

The Dow Jones Industrial Average declined 0.44 per cent, the S&P 500 declined 0.18 per cent and the Nasdaq Composite shed 0.09 per cent, as growth stocks closed slightly higher and underpriced value stocks dropped.

Attention remained on today’s release of US consumer price data and a European Central Bank (ECB) meeting that could reveal how soon policymakers will begin to withdraw support for Europe’s economy as the Covid-19 crisis subsides.

Today’s US consumer price data is expected to show the overall annual inflation rate spiking to 4.7 per cent, worrying many investors who are not persuaded by the Federal Reserves’s insistence the spike in prices will be transitory.

The STOXX Europe 600 index advanced 0.1 per cent to a new record close, but short of all-time peak on Tuesday. Britain’s FTSE dropped 0.2 per cent as UK-listed miners declined under pressure from lower base metal prices.

Overnight in Asia, the MSCI’s broadest index of Asia-Pacific shares outside Japan ended 0.4 per cent down, as did Japan’s Nikkei average.

Germany’s 10-year Bund yield, which is closely correlated with US Treasuries, extended Tuesday’s decline to -0.247 per cent, the lowest since late April, as investors continued to price in a dovish outcome to the ECB policy meeting today.



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