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Global shares edge higher as Fed in focus

written by Bella Palmer

The $1.9 trillion U.S. stimulus bill and the rollout of COVID-19 vaccinations stoked a bullish mood, but the focus was turning to the outlook for monetary policy

Global shares edged higher while U.S. bond yields were near a 13-month peak on Monday on bets economic growth would accelerate even though investors became wary of the Federal Reserve and other key central bank meetings in the days ahead.

The $1.9 trillion stimulus bill President Joe Biden signed into law last week and the rollout of COVID-19 vaccinations stoked a bullish mood, but the focus was gradually turning to the outlook for monetary policy.

The Federal Reserve is expected to rigidly stick to its easing plans, despite (Fed Chair Jerome) Powell & Co likely becoming significantly more upbeat on the outlook, said AFS analyst Arne Petimezas in Amsterdam.

However, the risks are towards a hawkish surprise. The $1.9 trillion stimulus has been adopted without much ado and the Biden administration has now set its sight on a big figure infrastructure bill, he added.

European shares advanced 0.7% in morning trading following gains in Japan, while S&P 500 futures ESc1 gained 0.2%, just below a record high level reached last week.

The MSCI world equity index rose 0.1%.

Mainland Chinese shares, however, fell despite data showing increase in industrial output and a rise in retail sales, with bluechip CSI 300 index dropping 2.2% on policy tightening worries.

Surveillance equipment maker Hikvision lost 3.2% after the U.S. Federal Communications Commission designated the firm, along with four others Chinese companies including Huawei, as posing a threat to national security.

The passage of the COVID-19 relief bill in the U.S. House of Representatives last week gave President Biden a major victory.

This will provide another shot in the arm for a U.S. economy sprinting out of a deep hole (10 million jobs are still missing at present), said Natixis economist Troy Ludtka in New York.

We see the macro backdrop - stimulus included - as being sufficient to jolt the U.S. economy beyond the 6% growth mark, he added in a note.

The Bank of England and Bank of Japan also have meetings on Thursday and Friday this week.

The 10-year U.S. Treasuries yield stood at 1.619%, having reached 1.642% on Friday, a high last seen in February last year.

Higher U.S. bond yields saw the dollar rising against other major currencies. The dollar index gained 0.1%.

The euro dropped 0.2% to $1.1932 from last week's high of $1.1990 while the dollar reached a nine-month high of 109.36 against the Japanese yen.

The British pound fell 0.3% to $1.3933.


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