World stock prices held near record highs on Wednesday, while U.S. bond yields flirted with their lowest levels in a month, as investors bet the Federal Reserve is some way off from tapering its economic stimulus.
MSCI’s all-country world index (.MIWD00000PUS) last stood at 716.64, after scaling an intraday high of 718.19 on Tuesday, led by gains in European stocks.
On Wall Street on Tuesday, the S&P500 (.SPX) was steady and near its record high as investors looked to Thursday’s inflation data.
The 10-year U.S. debt yield, on the other hand, fell to 1.513% , its lowest level in a month, and down a quarter of a percentage point from a 14-month peak of 1.776% hit in March. It last stood at 1.533%, almost flat so far on Wednesday.
“As the recovery in the job market is contained, any discussion at the Fed on tapering is unlikely to gain momentum, even if it starts soon,” said Naokazu Koshimizu, senior rates strategist at Nomura Securities.
“So those who had bet on steepening of the yield curve are unwinding their positions while some investors are also now buying to earn carry.”
U.S. payrolls data last Friday showed job hiring did not grow as fast as economists had expected, despite growing signs of a labour shortage. read more
Many analysts think more evidence of strong jobs growth would be required for the Federal Reserve to step up its discussion on tapering.
The U.S. central bank has said rises in inflation this quarter would be transient and would not threaten price stability, one of its key mandates.
Thursday’s U.S. consumer price data is expected to show the overall annual inflation rate rose to 4.7% and core inflation increased to 3.4%.
While those readings will be well above the Fed’s inflation target of 2%, many economists expect the inflation rate to ease in coming months, allowing the Fed to wait before taking any tapering measures.
Yet some investors remained wary that a tight labour market could lead to unexpectedly strong inflationary pressures.
“The U.S. labour market looks really tight. At the moment, workers are not coming back for various reasons. But they will eventually return and as payrolls grow, companies will have to raise wages,” said Yoshinori Shigemi, macro strategist at Fidelity International.
Major currencies were steady.
The euro stood flat at $1.2173 , while the dollar fetched 109.50 yen .
Investors have scaled back expectations that the European Central Bank may indicate a plan to reduce its asset purchases when it reviews policy on Thursday.
Oil prices held firm after U.S. Secretary of State Antony Blinken said that even if the United States were to reach a nuclear deal with Iran, hundreds of U.S. sanctions on Tehran would remain in place. read more
U.S. crude futures closed above $70 per barrel for the first time since Oct 2018 on Tuesday and last stood at $70.21, up 0.2%.
Brent futures rose 0.2% to $72.35, staying near their highest level since early 2020.
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