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World stocks flat, while bond yields drop

bond yields drop

MSCI’s all-country world equity index ended 0.03% lower at 726.09 and FTSEurofirst 300 index slid 0.1% to close at 1777.58

World stock prices finished flat, while bond yields dropped on Wednesday after US Federal Reserve Chair Jerome Powell said a recent inflation spike will fade, leading the S&P 500 to a fresh intraday record.

Powell said in congressional testimony that high inflation was for goods and services tied to the reopening and the US economy was “still a ways off” from levels the Fed wanted to see before tapering its stimulus support.

Powell’s remarks relieved investors who were concerned inflation data would prompt the Fed to signal the beginning of tapering, said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.

US producer prices surged in June to the largest annual gain in more than 10-1/2 years, the Labor Department said. A day earlier, it said consumer prices rose by the most in 13 years.

Both the CPI (consumer price index) yesterday and the PPI (producer price index) today came in considerably above expectations and signalled that inflation continues to run hot, Arone said. Even in the face of that, Powell has stood steadfast.

The yield on the 10-year Treasury note tumbled 6.6 basis points to 1.3492%, the dollar eased, and stocks on Wall Street gained, though gains were pared at the close of trading.

MSCI’s all-country world equity index ended 0.03% lower at 726.09, after earlier matching the record intra-day high of 728.77 on Tuesday. The broad pan-European FTSEurofirst 300 index slid 0.1% to close at 1777.58, just below Tuesday’s record high.

On Wall Street, the Dow Jones Industrial Average (DJIA) advanced 0.13%, the S&P 500 gained 0.12%, and the Nasdaq Composite dropped 0.22%.

In the US, President Joe Biden’s administration is still pushing for US fiscal stimulus. Late on Tuesday, Democrats on the Senate budget committee reached an agreement on a $3.5-trillion infrastructure investment plan they aim to include in a budget resolution to be debated this summer.

Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.25% as Chinese blue-chips declined 1.15%. Japan’s Nikkei slipped 0.38%.

Elsewhere, the Bank of Canada held its key overnight interest rate at a record low 0.25% and said it would cut its weekly net purchases of government bonds to a target of C$2 billion ($1.6 billion) from C$3 billion.

German 10-year Bund yields dropped to -0.319% after Germany sold 3.392 billion euros in a top-up of its 0.00% 10-year Bund.

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