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Global equities rally, dollar falls as inflation concerns grow

Global equities rally, dollar falls as inflation concerns grow

WALL STREET. A Wall Street sign is seen near the New York Stock Exchange in New York City, May 4, 2021.

Brendan McDermid/Reuters

Market participants are gearing up for US personal consumption data – the Federal Reserve's preferred inflation measure

Global equity markets gained on Monday, May 24, while the dollar traded near four-month lows against major currencies as investors eye upcoming US inflation readings for guidance on monetary policy.

Market participants were gearing up for US personal consumption data – the Federal Reserve‘s preferred inflation measure – on Thursday, May 27, and a potential tapering of asset purchases in the face of strong economic data.

The yield on the benchmark 10-year US Treasury note 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 0.66% to 706.20. 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 0.54%, to 34,393.98, the S&P 500 gained 0.99%, to 4,197.05, and the Nasdaq Composite by 1.41%, to 13,661.17.

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 edged up 0.4%.

Emerging markets stocks fell 0.16% after Belarusian authorities on Sunday, May 23, 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 surveys of the global services sectors on Friday, May 21, all eyes will be on US 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 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 of 89.646 on Friday.

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

Oil prices rose more than 3% on Monday as a demand bump fueled by COVID-19 vaccination drives gave traders optimism that the market can absorb any Iranian oil that would come on the market if Western talks with Tehran lead to the lifting of sanctions.

Brent crude oil futures settled up $2.02, or 3%, at $68.46 a barrel, while July US West Texas Intermediate ended at $66.05 a barrel, up $2.47, or 3.9%.

Spot gold was up 0.11% at $1,882.3100 per ounce at 4:35 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, the world’s largest cryptocurrency, was last up 12% at approximately $39,400, 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. –