Stocks scale another peak as markets await Fed signal
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[June 14, 2021] By
Thyagaraju Adinarayan and Hideyuki Sano
LONDON/TOKYO (Reuters) - World stocks
climbed another peak on Monday, while U.S. bond yields were near
three-month lows as worries of rising inflation abated and investors
anticipated the U.S. Federal Reserve sticking to its dovish course this
week.
The MSCI world equity index and Europe's STOXX 600 index rose 0.3% to
record highs, lifted by the prospect of a broadening economic recovery
from COVID-19 and anticipation of dovish monetary policy from central
banks.
Recovery bets also boosted oil to May 2019 highs. [O/R]
S&P 500 futures meanwhile nudged 0.1% higher, with investors apparently
viewing Thursday's above-forecast U.S. inflation data and surging
factory prices in China as temporary or manageable.
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Goldman Sachs economists said concerns that rising inflation will derail
the market recovery or lead to sharply higher bond yields were probably
misplaced.
"The rally at the moment feels cautiously optimistic. The reality is
that I feel it will continue to climb slowly as we continue to see
decent data supporting the argument," John Woolfitt, Director at
Atlantic Capital at London, said.
Yields on the 10-year U.S. Treasuries stood at 1.4619%, with investors
seemingly relaxed about their inflation concerns, which spooked rates in
late March. [US/]
"It is becoming painful for bond bears and I bet the 10-year yield will
fall to 1.25% or even 1%," said Akira Takei, fund manager at Asset
Management One, noting that the U.S. economic recovery is likely to slow
in coming months.
Speculators' net long positions in U.S. bond futures hit the highest
level since October 2017, U.S. financial watchdog data showed.
Many investors expect the Fed to repeat its dovish view at its two-day
meeting from Tuesday.
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People are seen on Wall Street outside the New York Stock Exchange
(NYSE) in New York City, U.S., March 19, 2021. REUTERS/Brendan
McDermid/File Photo
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"The focus is not on monetary policy. Rather, the focus is on talking about
talking about tapering bond purchases, as demand for liquidity in the US economy
starts to slow," Paul Donovan, chief economist of UBS Global Wealth Management,
said in a note to clients.
Markets in Asia were calmer with China, Hong Kong and Australia closed for a
holiday. Japan's Nikkei rose 0.7%, while MSCI's broadest index of Asia-Pacific
shares outside Japan was down 0.2%.
Broader markets largely shrugged off the weekend's G7 meeting, which scolded
China over human rights in its Xinjiang region, called for Hong Kong to keep a
high degree of autonomy and demanded a full and thorough investigation of the
origins of the coronavirus in China.
"The meeting reminded us that Sino-US tensions are not going away. The meeting
reminded us that Brexit never goes away," Donovan added.
BOUNCY BITCOIN
In currencies, the euro has lost steam after the European Central Bank last week
showed no willingness to reduce its stimulus and traded at $1.2109, having
fallen to a one-month low of $1.2093 on Friday . [FRX/]
![](http://archives.lincolndailynews.com/2021/Jun/14/images/ads/current/LPL_small%201.gif)
The yen stood little changed at 109.68 yen, while the British pound changed
hands at $1.4108, near the lower end of its trading range over the past month.
Bitcoin held on to weekend gains, when Elon Musk flagged Tesla's possible
resumption of transactions using the token. It was last bought at $39,267.
Fed BS vs. VIX
https://fingfx.thomsonreuters.com/
gfx/buzz/yxmvjaydqpr/Pasted%20image%201623659154629.png
(Reporting by Thyagaraju Adinarayan in London and Hideyuki Sano in Tokyo.
Additional reporting by Tom Westbrook in Singapore; Editing by Jacqueline Wong
and Alexander Smith and Chizu Nomiyama)
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