SYDNEY (Reuters) – Stock markets were mixed on Monday with the approval of a $ 1.9 trillion stimulus bill in the U.S. Senate, a good omen for faster global economic growth, but it also put new pressure on Treasury bonds and high-valued technology stocks.
The optimistic economic news continued, as China’s exports increased 155% in February, compared to the previous year, when much of the economy closed to combat the coronavirus.
“With Senate approval, we expect the momentum for growth to accelerate and we expect global GDP growth to rise to an annualized rate of 7.5% in the intervening quarters of the year,” JPMorgan economists said in a note.
“Each $ 1 trillion of fiscal stimulus adds about $ 4 to $ 5 to EPS, which implies an increase of 6 to 7% for the rest of the year.”
However, analysts also expected strong acceleration in inflation, fueled in part by the latest spike in oil prices, which was increasing bond yields and broadening stock valuations, especially in the high-tech space.
This saw Nasdaq futures reverse initial gains to drop 1.0%, pulling S&P 500 futures down 0.2%.
The broader MSCI index for Asia Pacific stocks outside Japan continued to decline 0.5%, while Chinese blue chips fell 0.9%.
Japan’s Nikkei held on to a 0.2% gain, while EUROSTOXX 50 futures still rose 0.8% and FTSE futures 0.9 %%.
Stock investors were thrilled with US data showing that non-farm payrolls increased by 379,000 jobs last month, while the unemployment rate fell to 6.2%, in a positive sign for incomes, spending and earnings corporate.
US Treasury Secretary Janet Yellen tried to contain inflation concerns by noting that the real unemployment rate was close to 10% and that there was still a lot of slack in the job market.
However, yields on 10-year US Treasury bonds still hit a 1.625% year-on-year high in the wake of the data, and stood at 1.59% on Monday. Yields increased by a significant 16 basis points during the week, while German yields fell by 4 basis points.
The European Central Bank meets on Thursday amid rumors that it will protest against the recent rise in eurozone yields and perhaps consider ways to contain further increases.
The diverging yield path boosted the dollar against the euro, which fell to a three-month low of $ 1.1892, and was last fixed at $ 1.1904.
BofA analyst Athanasios Vamvakidis argued that the potent mix of US stimulus, faster reopening and greater consumer firepower was a clear positive for the dollar.
“Including the current proposed stimulus package and other advantages of a second-half infrastructure project, the total US fiscal support is six times greater than the EU’s recovery fund,” he said. “The Fed also supports the fact that the US money supply grows twice as fast as that of the eurozone.”
The dollar index duly skyrocketed to levels not seen since the end of November and stood at 92.057, well above its recent low of 89.677.
He also won in the low-yield yen, reaching a nine-month top at 108.63, and was changing hands for the last time at 108.41.
The jump in yields weighed on gold, which offers no fixed return, and left it at $ 1,705 an ounce, just above the nine-month low.
Oil prices rose to their highest levels in more than a year after Yemen’s Houthi forces fired drones and missiles into the heart of Saudi Arabia’s oil industry on Sunday, raising concerns about production.
Prices had already been supported by a decision by OPEC and its allies not to increase supply in April. [O/R]
Brent rose $ 1.44 a barrel to $ 70.80, while US oil rose $ 1.36 to $ 67.45 a barrel.
Wayne Cole reporting; Editing by Sam Holmes