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Global stocks hit new high as inflation worries subside

written by Bella Palmer

The MSCI world equity index and STOXX 600 index advanced 0.3%, S&P 500 futures rose 0.1%, and Japan's Nikkei advanced 0.7%

Global stocks hit fresh high Monday, while U.S. bond yields were near three-month lows as inflation concerns subsided and investors anticipated a dovish stance by the Fed this week.

The MSCI world equity index and STOXX 600 index advanced 0.3% to hit record high levels on the prospect of a broad-based economic recovery from the pandemic and in anticipation of dovish monetary policy from central banks.

Recovery bets also boosted oil to levels last seen in May 2019.

S&P 500 futures rose 0.1% as investors viewed Thursday's higher-than-expected U.S. inflation data and surging factory prices in China as temporary.

Goldman Sachs economists said concerns that rising inflation will derail the market recovery or lead to sharply higher bond yields were probably misplaced.

The rally at the moment feels cautiously optimistic. The reality is that I feel it will continue to climb slowly as we continue to see decent data supporting the argument, John Woolfitt, Director at Atlantic Capital at London, said.

The 10-year U.S. Treasuries yields were at 1.4619%.

It is becoming painful for bond bears and I bet the 10-year yield will fall to 1.25% or even 1%, said Akira Takei, fund manager at Asset Management One, noting that the U.S. economic recovery is likely to slow in coming months.

The focus is not on monetary policy. Rather, the focus is on talking about talking about tapering bond purchases, as demand for liquidity in the US economy starts to slow, Paul Donovan, chief economist of UBS Global Wealth Management, said in a note to clients.

In Asia, trading was subdued as markets in China, Hong Kong and Australia were closed for a holiday. Japan's Nikkei advanced 0.7%, while MSCI's broadest index of Asia-Pacific shares outside Japan was declined 0.2%.

Broader markets largely shrugged off the weekend's G7 meeting.

The meeting reminded us that Sino-US tensions are not going away. The meeting reminded us that Brexit never goes away, Donovan added.


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