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Equities rally, dollar falls as inflation concerns grow

Stocks, dollar pause their climbs; lira locked in tailspin
Stocks, dollar pause their climbs; lira locked in tailspin   -   Copyright  Thomson Reuters 2021
By Reuters

By Chibuike Oguh

NEWYORK (Reuters) – Global equities gained on Monday while the dollar traded near four-month lows against major currencies as investors eye upcoming U.S. inflation readings for guidance on monetary policy.

Market participants were gearing up for the U.S. personal consumption data on Thursday, the Federal Reserve’s preferred inflation measure, and a potential tapering of asset purchases in the face of strong economic data.

The yield on the benchmark 10-year U.S. Treasury dipped to one-week lows, while safe-haven gold inched higher.

“The market is taking a deep breath and is coming to terms with inflation,” said Thomas Hayes, managing member at Great Hill Capital in New York.

The MSCI world equity index rose 0.77% to 706.96. Europe’s broad FTSEurofirst 300 index added 0.10% to close at 1,715.51, with technology stocks helping the index hover near record highs.

On Wall Street, the Dow Jones Industrial Average rose 0.65%, to 34,429.56, the S&P 500 gained 1.14%, to 4,203.23 and the Nasdaq Composite added 1.57%, to 13,682.07 in afternoon trading.

Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.1% in slow trade. Japan’s Nikkei added 0.2% and Chinese blue chips 0.4%.

Emerging markets stocks fell 0.2% after Belarusian authorities on Sunday forced an airliner to land and arrested an opposition-minded journalist who was on board, drawing condemnation from Europe and the United States.

After the strong growth shown by Friday’s surveys of the global services sectors, all eyes will be on U.S. personal consumption and inflation figures this week.

A high core inflation reading would ring alarm bells and could revive talk of an early tapering by the U.S. Federal Reserve.

“The market was afraid that the Fed will get behind the curve with tapering but that doesn’t seem to be the case with commodity prices stabilizing,” Hayes said.

The dollar index moved around the 90 mark, down 0.2% on the day in afternoon trading in New York, slightly above a four-month low on Friday of 89.646.

The U.S. 10-year Treasury yield fell to 1.6046% from 1.632% late on Friday.

Oil prices edged higher as Iran and the U.N. nuclear watchdog extended a recently expired monitoring agreement by a month, averting a collapse that could have pitched wider talks on reviving the 2015 Iran nuclear deal into crisis.

Brent crude futures rose $2.9 to $68.39 per barrel. U.S. crude futures gained $2.34 to $65.92 a barrel.

Spot gold was up 0.1% at $1,882.83 per ounce at 1:42 p.m ET.

Digital currencies bounced back on Monday, regaining ground lost during a weekend sell-off that was sparked by renewed signs of a Chinese crackdown on the emerging sector.

Bitcoin was last up 7% to approximately $37,600, erasing losses of 7.5% from a day earlier, Second-largest cryptocurrency ether jumped nearly 19% to $2,491 after slumping more than 8% on Sunday to near a two-month low.

(Reporting by Chibuike Oguh in New York; Editing by Marguerita Choy)