Fed inflation speech supports stocks and New Zealand dollar wins
* S&P futures up 0.29%, European equities stable
* Fed’s Clarida downplays inflation concerns
* Dollar close to January lows
* German bond yields fall on accommodative ECB comments
LONDON, May 26 (Reuters) – Futures indicated a stronger Wall Street open on Wednesday and European stocks were flat near recent record highs after U.S. Federal Reserve officials allayed inflation fears, although that the New Zealand currency rose relative to rate hike expectations. Richard Clarida, vice chairman of the Fed, said on Tuesday that the US central bank would be able to curb a spike in inflation and stage a “soft landing” without putting the country’s economic recovery back on track.
“Inflation is the main focus of our customers, companies are complaining about supply chain bottlenecks, job shortages in the United States,” said Eddie Cheng, head of international management of multi-asset portfolios at Wells Fargo Asset Management
But he added: “Our baseline scenario is that the Fed thinks this is transient.”
S&P 500 e-minis rose 0.29%, following recent highs after the index closed down 0.21%. Global stocks have changed little.
European stocks remained stable below a record high set on Tuesday. The German DAX dipped 0.1% and the UK FTSE 100 lost 0.22%.
All the same, Clarida’s comments reflect a shifting tone at the Fed. A month ago, Fed Chairman Jerome Powell said it was “not yet” time to consider a discussion of reducing policy – or slowing the pace of its purchases of assets – but more recently policymakers have recognized they are closer to debating when their crisis support for the US economy.
The S&P 500 will only end the year about 2.5% above its current level, as concerns about rising inflationary risks may dampen some of the enthusiasm for U.S. equities this year, according to a Reuters survey of strategists.
And in New Zealand, the central bank kept interest rates at record highs on Wednesday, but hinted at a hike as early as September of next year. The prospect of higher rates propelled the New Zealand dollar soaring more than 1% to a three-month high.
The dollar index remained stable after hitting its lowest level since January 7 on Tuesday. The US currency was also stable against the yen at 108.85. The euro dipped 0.1% to $ 1.2236, but remained close to the 4-1 / 2 month highs of the previous session.
Analysts are increasingly optimistic about the euro zone.
“Our baseline forecast calls for a strong rebound in euro area economic activity as vaccinations bring the pandemic under control,” Oxford Economics analysts said in a note.
The benchmark 10-year US Treasury yield remained stable at 1.5638% after falling to multi-week lows in the previous session to ease inflation fears.
The yield on German 10-year bonds, the benchmark for the eurozone, fell almost 4 basis points to -0.201% following a recent dovish comment from the European Central Bank.
On Wednesday, ECB board member Fabio Panetta said the ECB should not reduce the pace of asset purchases because the economic recovery is in an early phase and inflation remains too low.
Comments like this “reduce the likelihood that we will get a mini cut announcement from the ECB at the June meeting,” said Mohammed Kazmi, portfolio manager and macro strategist for fixed income at UBP.
Bitcoin rose briefly above $ 40,000, although the volatile cryptocurrency is down 30% this month.
The largest MSCI index of Asia-Pacific stocks outside of Japan rose 0.45% to more than two-week highs, while the Tokyo Nikkei rose 0.3%.
Chinese blue chips were flat after posting their biggest daily gain in nearly 11 months on Tuesday, easing inflation fears and a strong yuan.
On Wednesday, the Chinese onshore and offshore yuan strengthened nearly three years against the dollar, with the onshore currency breaking through a key level that had prompted state banks to intervene a day earlier.
Oil traded in a narrow range, supported by optimism about improving fuel demand in the United States and a weak dollar, but with the prospect of Iranian oil coming back while controlling prices. earnings.
Global benchmark Brent was little changed at $ 68.62 and US crude slipped 0.2% to $ 65.94 per barrel.
Spot gold added 0.34% to $ 1,905 an ounce.
Reporting by Carolyn Cohn; Editing by Toby Chopra and Alex Richardson