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World Global shares rise, but surging commodities and bond yields feed concern over inflation

12:59  22 february  2021
12:59  22 february  2021 Source:   businessinsider.com.au

Stocks extend bull run on hopes of quick economic recovery

  Stocks extend bull run on hopes of quick economic recovery Optimism about a rapid global recovery and low interest rates push Asian shares higher, extending their recent gains.Oil prices soared to a 13-month high as a deep freeze due to a severe snow storm in the United States not only boosted power demand but also threatened oil production in Texas.

World shares sank on Monday as expectations for faster economic growth and inflation battered bonds and boosted commodities , while rising real yields made equity valuations look more stretched in comparison. “The coming week is relatively thin on the international data agenda, but after the recent rise in long bond yields , Fed Chairman Powell’s hearings in both chambers of Congress (Tuesday / Wednesday) will be attracting great interest,” said Elisabet Kopelman, U.S. economist at SEB.

SYDNEY (Reuters) - Asian shares turned mixed on Monday as expectations for faster economic growth and inflation globally battered bonds and boosted commodities , while rising real yields made equity valuations look more stretched in comparison. MSCI's broadest index of Asia-Pacific shares outside Japan "Meanwhile, central banks seem set to look through this year's inflation increase, keeping the curves' front end anchored." Federal Reserve Chair Jerome Powell delivers his semi-annual testimony before Congress this week and is likely to reiterate a commitment to keeping policy super easy for as

a lot of smoke around it: A SpaceX Falcon 9 rocket lifts off from pad 40 at Cape Canaveral Space Force Station. A SpaceX Falcon 9 rocket lifts off from pad 40 at Cape Canaveral Space Force Station.
  • Global shares gain, but caution picked up over a possible near-term spike in inflation.
  • US futures eased, pointing to a weaker start to trade later on Wall Street.
  • Oil rose, supported by supply outages in Texas, where a winter storm has knocked out production.
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Global equities rose on Monday, but the mood among investors was cautious, as surging commodity prices and government bond yields continued to fan fears of a damaging rise in inflation, just as the world economy is starting to recover from the impact of COVID-19.

Australia, NZ dlrs ease back, bonds buried by inflation bets

  Australia, NZ dlrs ease back, bonds buried by inflation bets Australia, NZ dlrs ease back, bonds buried by inflation betsSYDNEY (Reuters) - The Australian and New Zealand dollars stepped back from major resistance barriers on Wednesday as a jump in Treasury yields gave the U.S. dollar a reprieve, while domestic bonds took a beating amid fears of faster global inflation.

Shares turn cautious as bond yields , commodities surge . Fed Rate Monitor Tool. Currency Converter. (Reuters) - European shares fell on Monday as concerns over the risk of higher inflation due to a jump in commodity prices tempered optimism around a vaccine-led economic recovery.

Rising bond yields hurt the appeal of gold, with spot prices dropping to a seven-month low before recouping some losses to trade at ,773 per ounce.[GOL/]. “The reflation-narrative-driven selloff in bond yields really has now developed a life of its own,” said James Athey, investment director at Aberdeen “It is starting to move real yields higher, which is increasingly suggestive of a market which is testing central bank resolve.” Disappointing U.S. jobless figures didn’t help investor sentiment. An unexpected increase in the number of Americans seeking jobless benefits weighed on the outlook.

Futures on the S&P 500 and the Dow Jones fell between 0.7% and 1.0%, while those on the technology-heavy Nasdaq 100 dropped by nearly 1.5%, pointing to a weak start to trade later in the day.

The benchmark indices have all hit record highs this month, thanks to the promise of more US government stimulus, as well as an acceleration in the pace of COVID-19 vaccinations.

But these same factors have ignited a rally in commodities, sending the price of economically sensitive materials such as copper and nickel to multi-year highs, while the cost of lumber has hit all-time peaks.


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Government bond yields, particularly in the United States, are surging, as their price falls. The yield on the benchmark 10-year US Treasury note is around 1.37%, its highest in a year, having doubled in the space of six months.

Asian markets mixed as inflation fears play against recovery hopes

  Asian markets mixed as inflation fears play against recovery hopes Asian markets were mixed Thursday on profit-taking and growing worries about inflation, which offset long-running optimism about the global recovery as vaccines are rolled out, infection rates slow and Joe Biden's stimulus winds through Congress. Oil prices pushed further up to 13-month highs as the severe cold snap in the United States hammers production, even trumping news that Saudi Arabia is planning to up output in light of the commodity'sOil prices pushed further up to 13-month highs as the severe cold snap in the United States hammers production, even trumping news that Saudi Arabia is planning to up output in light of the commodity's strong performance in recent months.

Stock markets fell worldwide on Thursday on fears over the health of the global economy and the banking sector, with MSCI's global stock index dropping to more than 20 percent below its all-time high, while safe-haven 10-year Treasury yields hit their lowest since 2012. The 10-year U.S. Treasury note yield dropped to 1.53 percent, its lowest since September 2012, while the 30-year bond yield hit 2.38 percent, its lowest in a year. The yield spread between 10-year and 2-year notes narrowed to its tightest since November 2007, reflecting an outlook for weak economic growth and low inflation .

Inflation -linked bonds are a way to protect your investment's principal amount from being eroded by the forces of inflation . Inflation refers to the general rise in prices of goods and services in an economy over time, and so can also be construed as a reduction in the purchasing power of one dollar. Standard yield calculation methods still apply to inflation -adjusted bonds , only investors are more likely to pay attention to real yield with an inflation -adjusted bond moreso than the nominal rate. Indeed, inflation -adjusted bonds have yields that appear to be lower than non-adjusted (nominal)

More pressingly for risk assets has been the pick up in so-called real yields, which strip out the effects of inflation. In the last month alone, 10-year real yields have risen by around a quarter of a percentage point and is one of the indicators that has needled some of the early-2021 euphoria among equity investors.

US lawmakers will open debate on President Joe Biden's proposed $US1.9 trillion American Rescue Plan act this week. Meanwhile, Federal Reserve chairman Jerome Powell will deliver testimony to the Senate Banking and House Financial Services Committees.

"It would seem out of character for Powell to deliver a hawkish spin, especially given this back up in real yields and a repricing of the Fed (albeit small) in recent times. So soothing words for markets seems likely but the inflation fears are unlikely to go away whatever he says," Deutsche Bank strategist Jim Reid said.

Asia markets swing as reopening optimism battles inflation fear

  Asia markets swing as reopening optimism battles inflation fear Asian markets fluctuated Tuesday, with growing optimism that the rollout of vaccines will allow the global economy to get back on track offset by niggling worries that the recovery will fan inflation and lead to a hike in interest rates. With governments picking up the pace in their inoculation drives, and infection and death rates slowing in most parts of the world, observers are predicting a surge in economic activity from the middle of the year as lockdowns are eased.

Rising bond yields hurt the appeal of gold, with spotprices hitting a seven-month low of ,759.3 an ounce on Friday. While rising yields weighed on investor sentiment,"disappointing U.S. jobless figures didn't help the cause,either," said Rodrigo Catril, forex strategist at NationalAustralia Bank. The suspensions are the latest effort by the SEC to address soaring retail investor interest driven by conversation on social media platforms, most notably seen in a surge and subsequent plunge in share prices of GameStop Corp. Last week, the regulator suspended trading in a defunct stock.

Inflation means consumer prices are rising , but can also bring profit from certain investment choices like those in real estate, commodities , stocks, and bonds . When the overall demand for goods build, supply prices will rise . Increases in the cost of production—due to everything from growth in the cost labor to rises in the cost of raw commodities . Most consumers view inflation as an adverse situation. However, inflation does have a positive side when looked at from an investment standpoint.

In Europe, the Stoxx 600 was down 1.2%, while London's FTSE 100 fell 1.1% and Frankfurt's DAX lost 1.3%. Overnight in Asia, the picture was similarly downbeat. The Shanghai Composite and the Hang Seng fell 1.4%, while Seoul's KOSPI fell 1.1%.

"Investors are seeing a light at the end of the tunnel, but the tunnel is very long. Despite the significant progress made since the outbreak of the pandemic, concerns about new, potentially more dangerous COVID-19 variants persist," Axi strategist Milan Cutkovic said.

"Market participants are increasingly looking at the bond market. Rising yields threaten to slow the stock market rally down," Cutkovic added.

Oil marched higher, boosted by a winter storm in Texas that has knocked out around 40% of total US crude supply. Brent crude futures briefly traded above $US65 a barrel for the first time since last January and were last up 0.75% at $US62.61 a barrel. WTI crude, which has gained 14% this month, was up 0.7% at $US59.62 a barrel.

Asian equities advance but inflation, correction worries persist .
Asian markets rose Wednesday following the previous day's losses but investors remain on guard over a possible correction as concerns about asset bubbles and a surge in inflation continue to play against progress in fighting coronavirus. "If interest rates start moving higher and quicker than expected, then there's a chance there might be more significant pullback in the market," she told Bloomberg TV. Asian investors brushed off a Wall Street retreat to push higher Wednesday, with Hong Kong rallying more than one percent while Shanghai, Singapore, Seoul and Taipei were also in positive territory.

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