World Stocks on Record Highs as Bond Yields Ease

The world’s stock markets posted record highs on Wednesday as bond yields eased. Data showed U.S. inflation was not rising too fast with the re-opening of the economy.

European shares opened 0.1% higher, as fears that a strong inflation reading might endanger the Federal Reserve’s accommodative stance receded.

Most Asia-Pacific share indexes edged up led by Hong Kong’s Hang Seng Index.

S&P 500 futures were on course to a further 0.1% rise after the S&P 500 closed at record highs on Tuesday.

MSCI’s gauge of equity performance in 50 countries gained 0.2% to a record high.

Gains were capped following Johnson & Johnson’s statement that it would delay rolling out its COVID-19 vaccine to Europe. The announcement came after U.S. health agencies recommended pausing its use in the country. Six women who received the vaccine developed rare blood clots.

Benchmark U.S. Treasury yields marked a new three-week low as they continued to fall.

Japan bucked the trend, as the Nikkei dropped 0.4%. A rising number of COVID-19 cases raised doubts about its economic recovery. The country has 100 days to go until Tokyo is scheduled to host the Olympics.

The U.S. Consumer Price Index

The U.S. CPI had its biggest rise since August 2012, climbing 0.6% in March. On Tuesday, data showed that rising vaccinations and fiscal stimulus unleashed pent-up demand. Some economists had forecasted the CPI would rise 0.5%, according to a poll.

The CPI surged 2.6%, in the 12 months through March, the largest gain since August 2018 and followed a 1.7% increase in February.

The data, however, are unlikely to change the Fed Chair Jerome Powell’s view that higher inflation in the coming months will be transitory. He is scheduled to speak at the Economic Club of Washington later in the day.

The “not too high” inflation reading and a relatively successful 30-year U.S. bond auction on Tuesday were the immediate reasons equity markets gained. This was a statement from François Savary, chief investment officer at Swiss wealth manager Prime Partners.

He said people are now waiting for the earnings season, which should give them more visibility on the outlook. Moreover, whether the significant market performance they’ve seen is logical and sustainable, he added.

Among U.S. companies reporting on Wednesday were JPMorgan Chase & Co. and Goldman Sachs Group Inc. 

Meanwhile, Deutsche Bank equity strategists expect S&P 500 earnings to come in 7.5% above consensus. That is well above the historical average of 4% but lower than in the previous three quarters.