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Recovery bets support stocks as Fed comes in focus

Published 03/14/2021, 08:54 PM
Updated 03/15/2021, 05:15 AM
© Reuters. A man wearing a protective face mask walks past a screen displaying a graph showing recent Nikkei share average outside a brokerage, amid the coronavirus disease (COVID-19) outbreak, in Tokyo

© Reuters. A man wearing a protective face mask walks past a screen displaying a graph showing recent Nikkei share average outside a brokerage, amid the coronavirus disease (COVID-19) outbreak, in Tokyo

By Danilo Masoni and Hideyuki Sano

MILAN/TOKYO (Reuters) - World shares inched higher while U.S. bond yields hovered 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 rose 0.7% in morning trading following gains in Japan .N225, while S&P 500 futures ESc1 rose 0.2%, just below a record high level touched last week.

The MSCI world equity index, which tracks shares in 49 countries, was up 0.1% by 0847 GMT.

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

Surveillance equipment maker Hikvision 002415.SZ 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 U.S. House of Representatives gave final approval last week to the COVID-19 relief bill, giving Biden his first major victory in office.

"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.

Investors also suspect the $1.9 trillion package, which amounts to more than 8% of the country's GDP, could stoke inflation - to the detriment of bonds, especially when their yields are so low.

Rising inflation expectations could prompt the Federal Reserve to signal it will start raising rates sooner when it announces its latest economic projections at the end of Federal Open Market Committee meeting on Wednesday.

"Following the fiscal stimulus packages it is inevitable that Fed GDP forecasts will be revised up, and some FOMC members might think rates will have to move higher sooner than they anticipated last December," wrote economists at ANZ.

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

The 10-year U.S. Treasuries yield US10YT=RR stood at 1.619%, having hit 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 =USD rose 0.1%.

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

The British pound slipped 0.3% to $1.3933.

Bitcoin fell 1.6% from a record high after Reuters reported that India would propose a law banning cryptocurrencies.

Oil prices rose as data showed China's economic recovery accelerated at the start of 2021, boosting the energy demand outlook at the world's largest oil importer.

Brent crude gained 0.8% to $69.76 a barrel, while U.S. West Texas Intermediate crude added 0.8% to $66.14.

© Reuters. FILE PHOTO: The Federal Reserve building is pictured in Washington, DC

Latest comments

Congratulations! Today is the 1 year anniversary of "Stimulus Hopes, Vaccine Hopes" title.
no, it's actually started in September 2020
the only reason is more buyers than sellers, the same reason every single time
sleepy a s what is up?
economic hopes? faded away? drama ended? asia in deep red yet again!
yeh, weird words " Asia buckled the trend to trade lower..." so ????
yeh, weird words " Asia buckled the trend to trade lower..." Explanation missing.
Id say it was strange how many people below are against the economy doing well but then i remember terr/orists have access to the internet
you can take the loan to feed your family while continue to work, then pay off the loan in the near future. that's the modern life for corps, individuals, and surprise surprise.. for govt too. I'm sure you already knew that but prefer to pout in the corner
oh did you complained when the 2017 rax cut added 2.2T to the debt when the economy was good then? you're perplexed I know.
  and get increases of 2% cpi on yr salary for the next ten years when the cost of living is 10% per year lifes great for the top 1% and lying government all in cohoots hahaha
Dam, those puts are done fellas 🤣
ded 😂
recovery bets.... hahahaha , ive been seeing this title for  a year now
Fake News... ***news because corrupt biden is president
Don't fall into the CCP joined Wallstreet stock market global harvesting action cycle.
Umm, what? They're barely green. Always need to find a reasy "why" assets are moving. It's the LEAST important element. How about giving us the "WHEN" Instead.
reality will kick in hard in a few days after this stimulus hype is over
yeah, the reality is if you are sitting on the sidelines you are missing out. Cash is a dangerous position right now.
 I bet you think BTC is a more safe asset than gold too, eh?
eat rice no need of edible oil
Try making a good gravy without it.
Flatish opening and closing expected, with a probable rise in the first followed by a equitable fall if not breached 15175.
Markets that *need* constant helicopter money are not strong market. Their entire valuation metric is broken when they only follow the M2 money supply...
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