NEW YORK (Reuters) – A gauge of global equity markets pulled back on Wednesday from the record high hit in the previous session as investors sold technology-related companies and the prospect of rising inflation tempered optimism around a vaccine-led global economic recovery.
Benchmark 10-year Treasury yields reached a one-year high to trade near pre-pandemic levels, before reversing course even as data pointed to a strengthening economy. The U.S. dollar gained ground against a basket of major currencies.
Data on Wednesday showed U.S. retail sales rebounded sharply in January after households received additional pandemic relief money from the government, suggesting a pick-up in economic activity after the restraints imposed by a fresh wave of COVID-19 infections late last year.
Other data showed inflation pressures building up at the factory gate, with producer prices posting their biggest gain since 2009 in January.
Facing a still-scarred economy that may need an extended time to recover fully, Federal Reserve officials last month debated how to lay the groundwork for the public to accept coming higher inflation, and also the need to “stay vigilant” for signs of stress in buoyant asset markets, according to minutes of the U.S. central bank’s Jan. 26-27 policy meeting.
The Fed has pledged to pin interest rates near zero until inflation rises to 2% and looks set to exceed that goal.
That super-easy stance, coupled with the Biden administration’s proposed $1.9 trillion spending bill for pandemic relief, has left some investors fretting over a coming surge in inflation.
Inflation pressures may force the Fed to revise its policy in the future, said Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut. But, he added, “It’s a high threshold we have to cross in order to get them to react.”
The MSCI’s global stock index fell 0.31% to 682.91. The index touched a record intra-day high of 687.26 on Tuesday, before erasing gains to snap an 11-day winning streak.
Graphic: Crawling back – https://fingfx.thomsonreuters.com/gfx/mkt/jbyvrdqejve/Pasted%20image%201613576528060.png
On Wall Street, the Nasdaq fell as concerns about inflation pressured stocks and as investors rotated out of technology shares.
The Dow Jones Industrial Average rose 90.27 points, or 0.29%, to close at 31,613.02, the S&P 500 lost 1.26 points, or 0.03%, to end at 3,931.33 and the Nasdaq Composite dropped 82.00 points, or 0.58%, to finish at 13,965.50.
European shares retreated from near one-year highs as concerns about a possible rise in inflation tempered optimism about a vaccine-led global economic recovery, while Kering <PRTP.PA> tumbled after sales at its Gucci brand fell more than expected.
The pan-European STOXX 600 index closed down 0.74%.
The U.S. dollar rose, helped by upbeat economic data. The dollar index climbed 0.23% to reach a more than 1-week high.
Bitcoin charged to a record high on Wednesday, a day after the cryptocurrency vaulted the $50,000 hurdle, even as analysts warned about the sustainability of such prices amid elevated volatility.
Oil prices rose, underpinned by a major supply disruption in the southern United States this week where a winter storm pounded Texas.
Brent crude futures settled at $64.34 a barrel, up 99 cents or 1.56%, while U.S. crude oil futures settled at $61.14 a barrel, up $1.09, or 1.82%.
Spot gold XAU= was down 1.09% at $1,774.71 an ounce.
(Reporting by Saqib Iqbal Ahmed; Editing by Nick Zieminski and Aurora Ellis)