An upbeat reading on China’s services sector added to the positive mood, with the largest MSCI Asia-Pacific equity index outside of Japan .MIAPJ0000PUS hitting its highest since March 2018.
The announcement that French water and waste company Veolia hopes to buy a nearly 30% stake in the smaller par Suez for 2.9 billion euros has boosted European markets, with exchanges in Paris. FCHI, Frankfurt .GDAXI and Milan .FTMIIB up 0.5 to 0.9%.
London was closed for a public holiday, while US equity futures showed a positive open for Wall Street ESc1 1YMc1.
This left the MSCI .MIWD00000PUS Global Stock Index near record highs. It rose more than 6% in August, forecast for its fifth straight month of gains.
Massive monetary and fiscal stimulus have supported stock markets in recent months, overwhelming concern about the prospects for a global economy battered by the coronavirus.
Fed Chairman Jerome Powell boosted equity markets last week by pledging to keep inflation at 2% on average, which allowed prices to warm up to balance periods of under pressure.
The risk of higher inflation going forward, assuming the Fed can pull it off, was enough to drive up longer-term Treasuries yields and steeper the yield curve.
US30YT = RR 30-year bond yields jumped almost 16 basis points last week and were last at 1.50%, 137 basis points above the two-year yield. The spread was now approaching the June spread of 146 basis points, the largest since late 2017.
“We now know that the Fed is behind inflation and that it will be less strict than before, so it would make sense to see higher yields,” said Eric Vanraes, bond portfolio manager at Eric Sturdza Investments in Geneva .
“But at the same time, we are in a difficult situation with regard to the economy and the Fed cannot allow a sharp steepening of the curve, otherwise its efforts to fight the crisis would have been destroyed,” he said. he declares.
“At some point I think we will see a correction in equities but not a collapse, and that would be normal and good news for the market as equity levels are too high and out of touch with economic reality and trends. profits. ”
A host of Federal Reserve officials are expected to speak this week, with Vice President Richard Clarida later Monday.
Tokyo’s Nikkei .N225 closed more than 1% higher, supported by Warren Buffett’s Berkshire Hathaway news (BRKa.N) had purchased more than 5% of the shares in each of the top five Japanese trading companies.
Prime Minister Shinzo Abe’s resignation on Friday had hurt stocks amid concerns about future fiscal and monetary stimulus policies. Those concerns were somewhat assuaged by the news that Abe’s chief cabinet secretary Yoshihide Suga, a close ally, is reportedly joining the race to succeed his boss. A lean leadership race is likely around September 14.
The dollar strengthened against its peers, but was ready for its fourth straight month of losses.
The dollar index rose 0.26% to 92.426 = USD, pushing back recent two-year lows. It was 0.5% firmer at 105.87 yen JPY = EBS, while the euro was a bit softer at $ 1.1885 EUR = EBS, after climbing 0.9% last week.
The Fed’s move to an average inflation target would likely continue to weigh on the greenback, analysts said.
“Even though US central bankers are likely to be happy with the interpretation of their measures, this is not good news for the dollar,” Commerzbank analysts said in a note.
Elsewhere, the dollar rebound weighed on gold, which fell 0.3% to $ 1,957 per ounce XAU =.
Brent crude oil hit its highest level in five months, supported by a 30% reduction in Abu Dhabi crude supplies and encouraging Chinese data.
Brent LCOc1 futures rose to $ 46.46 a barrel, the highest since March, and were up 1.4% for the last time. US West Texas Intermediate crude CLc1 was $ 43.35 per barrel, up 38 cents or 0.9%.
Reporting by Dhara Ranasinghe and additional reporting by Wayne Cole in Sydney and Julien Ponthus in London; Edited by Mark Heinrich
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