LONDON – World stocks rose to their highest in just over a week on Thursday after a report on US consumer prices calmed investor nerves about inflation and lifted the Dow Jones Industrial Average to a record close.
Wall Street’s main indexes opened higher on Thursday as US bond yields retreated to one-week lows on ebbing concerns over a strong pick up in inflation, while data showed jobless claims fell more than expected last week.
The Dow Jones Industrial Average rose 57.5 points, or 0.18 percent, at the open to 32354.5. The S&P 500 rose 16.7 points, or 0.43 percent, at the open to 3915.54, while the Nasdaq Composite rose 204.5 points, or 1.56 percent, to 13273.31 at the opening bell.
European stocks climbed, with the pan-European STOXX 600 index reaching a one-year peak and up 0.3 percent on the day. Britain’s FTSE 100 index rose 0.14 percent, France’s CAC 40 0.2 percent, and Italy’s FTSEMIB 1 percent. Germany’s DAX traded flat.
MSCI’s All Country World Index, which tracks stocks across 49 countries, rose to its highest in just over a week, up 0.5 percent on the day.
Earlier in Asia, an index of regional stocks excluding Japan rose 1.7 percent, led by a 2.3 percent surge in South Korea’s Kospi, and was on track for its first three-day advance in three weeks.
Japan’s Nikkei 225 gained 0.5 percent.
E-mini futures for the US S&P 500 index gained to their highest in two weeks, up 0.7 percent.
Relative calm in the Treasuries market also helped risk sentiment, with the benchmark yield settling around 1.5 percent after shooting to a one-year high above 1.6 percent last week as investors worried about the US economic recovery running too hot.
“If we look at history, we see that when yields have gone up, after a while equity markets have generally been okay,” said Justin Onuekwusi, portfolio manager at Legal & General Investment Management. “The only time you really see both equities and bonds sell off is in periods when there is a significant inflation scare.”
At this point with unemployment still so high, it is hard to see inflation becoming a problem, Onuekwusi said. Higher yields could be read as showing “that we are actually getting out of the quagmire we have been in.”
“And there is a natural yield cap — central banks will step in when rates move too quickly. They are differentiating between levels of yield and speed at which yields move.”
The European Central Bank sets its policy on Thursday and is likely to signal faster money printing to keep a lid on borrowing costs but stop short of adding firepower to its already aggressive pandemic-fighting package.
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 helped fuel inflation concerns and sent yields higher.
“Rises in US bond yields appear to have subsided a bit after the 10-year yield has reached 1.5 percent, even though many investors remain cautious before the Fed’s policy meeting,” said Naoya Oshikubo, senior economist at Sumitomo Mitsui Trust Asset Management.
“The Fed has ratcheted up its rhetoric on bond yields lately. The reality is, the economy is in a K-shaped recovery, with the service sector still in difficult conditions and the Fed would probably not want to let real interest rates rise.”
The dollar remained weaker following the economic data. The dollar index fell to its lowest in a week, 91.547.
The euro, on the other hand, rose to its highest in a week, at US$1.19685. The safe-haven yen traded flat at 108.425 per dollar.
Oil prices resumed their climb following two days of declines, after the Energy Information Administration reported a storage grew more than expected.
US crude futures rose 1.3 percent to US$65.25 per barrel. Brent crude futures rose 1.1 percent to US$68.68 per barrel.