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Wall Street to test record highs on Fed assurance

Wall Street

The S&P 500 e-minis rose 0.3%, the S&P 500 index finished at 4,197.05 points

Wall Street was set to test record high, underpinned by reassurances from Federal Reserve officials that monetary stimulus will remain in place during the pandemic.

The soothing words on inflation kept the dollar at four-and-a-half-month lows and triggered attempts to rein in the yuan.

US stock futures, the S&P 500 e-minis, rose 0.3%, pointing to a steady open on Wall Street. The S&P 500 index finished at 4,197.05 points on Monday, near its all-time high of 4,238.04 of May 7.

Ned Rumpeltin, European head of currency strategy at TD Securities, said markets were beginning to head for the traditional summer lull, with grinding shifts in the dollar, yuan and euro a focus.

This is more of a reflection of dollar weakness, rather than other currencies outperforming on their own, Rumpeltin said. You see risk appetite remain quite firm, with U.S. futures markets running back towards their recent highs.

The European Central Bank’s chief economist, Philip Lane, speaks at 1400 GMT. His comments will scrutinised for any concerns about the level of the euro or for hints on tapering.

The mood in Europe was underpinned by the German leading indicator IFO rising to its best level in two years as the accelerating roll-out of vaccines and first steps to reopening the economy boosted optimism, ING bank said in a note.

A multibillion-euro takeover deal combining two of Germany’s biggest property developers was in focus. Vonovia dropped 2% on news of its 18 billion-euro takeover of rival developer Deutsche Wohnen, whose shares soared more than 15%.

The STOXX index of leading European shares added 0.4% to 446.83 points after hitting a record high of 447.15.

James Bullard, president of the St. Louis Federal Reserve, put to rest tapering worries for the time being, saying on Monday that while still in the pandemic, it was not the time to talk more about changing the parameters of monetary policy.

The US personal consumption data on Friday is going to be the first major test about whether the Fed is going to see inflation as transitory, said Giles Coghlan, chief currency analyst at HYCM.

Reassurance on inflation and Bitcoin’s steadier footing after recent big losses helped to push Wall Street’s VIX “fear gauge” to below 20, near its long-term average.

Treasury yields, which dropped on Monday after a few Fed officials affirmed their support to keep monetary policy accommodative for some time, were little changed. The yield on benchmark 10-year Treasury notes was at 1.5910%.

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