Stocks drift as investors get cautious ahead of U.S. payrolls
Global stocks held on to record highs on Thursday as investors weighed inflation concerns ahead of key US economic data, while oil prices rose for a third straight session.
Market sentiment was cautious as investors moved away from big bets ahead of Friday’s release of U.S. employment data, which should further clarify whether the faster-than-expected pace of the economic recovery can be sustained and what that might mean for monetary policy.
In Europe, the Euro STOXX wide index (.STOXX) was down 0.2%, moving away from the highs reached on Tuesday, the UK FTSE 100 (.FTSE) slipping 0.7%, while the German DAX (.GDAXI) and the French CAC 40 (.FCHI) both fell 0.2%.
There was a similar pullback in Asia, with the MSCI’s largest Asia-Pacific stock index outside of Japan (.MIAPJ0000PUS) losing 0.2% after hitting three-month highs on Wednesday.
In Japan, the Nikkei stock average (.N225) rose 0.4%, while Australian stocks (.AXJO) hit all-time highs as investors applauded stronger economic growth data than expected published Wednesday. Read more
The MSCI World Stock Index (.MIWD00000PUS), which tracks shares of 49 countries, has hovered in and out of positive territory, below Tuesday’s record.
US futures indicated a decline on Wall Street at the opening.
As broad stock markets remain near record highs, momentum seen earlier in the year has run out of steam as investors fear a stronger-than-expected rebound in COVID-19 means higher inflation and an earlier-than-expected tightening of monetary policy.
A weekly US unemployment report and May private wage data on Thursday will be followed by monthly employment figures on Friday. Investors will be looking for signs of an economic rebound and rising inflation.
Adding to inflationary fears, oil prices hit their highest level since September 2019 amid expectations of increased demand for fuel later this year, particularly in the United States, Europe and China when main producers are strengthening the discipline of supply. Read more
So far, however, “increases in inflation expectations have coincided with good performance in stocks recently,” said Oliver Jones, senior market analyst at Capital Economics.
“In general, we believe these conditions will remain in place for some time to come.”
Capital Economics predicts that real world production will grow at the fastest rate in nearly 50 years this year.
“While it is possible that the big central banks will end up tightening their policies faster than expected if inflation does not fall as they anticipate, it will be difficult to say if that will happen until next year at most. early, “Jones noted.
Investment managers are also growing in concern, with BlackRock founder Larry Fink the latest to warn that the market is underestimating the risk of higher inflation.
Philadelphia Fed Chairman Patrick Harker also reiterated his call that “maybe it’s time to at least think about cutting our $ 120 billion in monthly treasury bond and bank-backed securities purchases. mortgage claims “.
The Fed has already announced that it will begin unwinding holdings of corporate bonds it acquired last year to calm credit markets at the height of the pandemic.
In Australia, the central bank is expected to start scaling back its emergency pandemic stimulus from next month, when investors believe it would announce not to extend its three-year return target beyond l ‘April 2024 obligation. Read more
European Central Bank (ECB) chief Christine Lagarde said on Wednesday the ECB would support the eurozone “well in” its recovery from a pandemic-induced double-dip recession.
The comments helped eurozone bond yields stay near their all-time lows on Thursday.
Germany’s 10-year yield, the benchmark for the block, rose less than a base to -0.19%. L5N2NL1IG
In the United States, 10-year Treasury yields were also flat before the release of US economic data.
Movements in the forex markets were limited, with the dollar index and other major pairs remaining within narrow ranges.
The dollar index, which measures the greenback against a basket of major currencies, hit 90.122, after finding solid support around the 89.946 mark in recent sessions after falling 2% in April and 1.6% in May. Read more
Against the euro, the dollar traded 0.2% higher to $ 1.2183 and it climbed a fraction higher on Antipodes currencies.
Brent rose 0.4% to $ 71.62 a barrel, after hitting its highest level since September 2019. U.S. crude futures reached $ 69.40, the highest since October 2018.
Spot gold fell 0.1% to $ 1,892.26 an ounce.
Our standards: Thomson Reuters Trust Principles.