Global stocks rise, but surge in commodities and bond yields fuel inflation concerns
Global equities rose on Monday, but investor sentiment was cautious as soaring commodity prices and government bond yields continued to fuel fears of a damaging rise in inflation, while soaring commodity prices and government bond yields continued to fuel fears of a damaging rise in inflation. as the global economy begins to recover from the impact of COVID-19.
The benchmarks have all hit record highs this month, thanks to the promise of more stimulus from the US government, as well as an acceleration in the pace of COVID-19 vaccinations.
But those same factors sparked a rally in raw materials, sending the price of economically sensitive materials like copper and nickel to multi-year highs, while the cost of wood has hit all-time highs.
Yields on government bonds, especially in the United States, soar as their prices fall. The return on the benchmark 10-year US Treasury bill is around 1.37%, its highest in a year, having doubled in six months.
More pressing for risky assets has been the rise in so-called real yields, which eliminate the effects of inflation. In the last month alone, real 10-year yields have risen by around a quarter of a percentage point and are one of the indicators that sparked some of the euphoria in early 2021 among equity investors.
U.S. lawmakers to open debate on President Joe Biden’s proposal US $ 1.9 trillion bailout act this week. Meanwhile, Federal Reserve Chairman Jerome Powell will testify before Senate committees on House banking and financial services.
“It would seem out of place for Powell to take a hawkish turn, especially given this rebound in real yields and a Fed price review (albeit weak) lately. Calming words for the markets seem then. likely, but inflation fears are unlikely to make everything he says go away, “Deutsche Bank strategist Jim Reid said.
In Europe, the Stoxx 600 was down 1.2%, while that of London FTSE 100 fell by 1.1% and that of Frankfurt DAX lost 1.3%. Overnight in Asia, the picture was just as pessimistic. the Shanghai Composite and the Hang Seng fell 1.4%, while that of Seoul KOSPI fell 1.1%.
“Investors see a light at the end of the tunnel, but the tunnel is very long. Despite the significant progress made since the start of the pandemic, concerns about new, potentially more dangerous COVID-19 variants persist,” the strategist said. d’Axi, Milan Cutkovic. mentionned.
“Market participants are increasingly looking to the bond market. Rising yields threaten to slow the recovery of the stock market,” added Cutkovic.
Oil rose, boosted by a winter storm in Texas that destroyed about 40% of the total U.S. crude supply. Brent Crude Futures briefly traded above $ 65 a barrel for the first time since last January and was last up 0.75% to $ 62.61 a barrel. gross WTI, which gained 14% this month, rose 0.7% to $ 59.62 a barrel.