Global stock markets climb to record as US yields hold above 5-month lows

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A gauge of global stocks hit an intraday record on Monday and U.S. Treasuries yields held above five-month lows reached last week as investors looked for signs on whether the Delta variant of the coronavirus could dent global growth.

Concerns about a slowing economic recovery due to climbing cases of the variant around the globe helped send the yield on the benchmark 10-year U.S. Treasury note to a five-month low of 1.25% last week. The yield had risen to as high as 1.78% in March as expectations for growth picked up with rising vaccination rates.

Analysts also cited a lack of supply for the drop in yields. The Treasury will sell $ 58 billion in three-year notes and $ 38 billion in 10-year notes on Monday, followed by $ 24 billion in 30-year bonds on Tuesday.

Earnings season is poised to get underway this week, along with key inflation data on consumer and producer prices, as well as comments from Fed Chair Jerome Powell, which should help investors get a glimpse of economic growth prospects and the central bank’s policy path.

“If you are going to make a bet on the 10-year after it has gone from 1.75% in March to 1.25% last week, the week we start earnings, have Jay Powell on Capitol Hill twice and both CPI and PPI, that is not well thought out,” said Art Hogan, chief market strategist at National Securities in New York.

“At some point this week we will likely find a balance in between that tug-of-war of fears of inflation and fears of growth slowing down, because you really can’t have both and we are not going to have one or the other.”

Benchmark 10-year notes last fell 2/32 in price to yield 1.3628%, from 1.356% late on Friday.

Equity gains on Wall Street were modest, with financials among the best-performing sectors on the session ahead of results from JPMorgan Chase, Goldman Sachs and Bank of America on Tuesday.

The Dow Jones Industrial Average rose 85.84 points, or 0.25%, to 34,956, the S&P 500 gained 7.73 points, or 0.18%, to 4,377.28 and the Nasdaq Composite added 0.79 points, or 0.01%, to 14,702.71.

European equities also moved higher, climbing to an intraday record of 461.01. The pan-European STOXX 600 index rose 0.66% and MSCI’s gauge of stocks across the globe gained 0.41% after hitting a record 727.02.

Powell’s testimony later this week will be closely eyed after the People’s Bank of China late on Friday moved to free up $ 154 billion for banks to buttress the economic recovery while the European Central Bank said it will discuss a change to its forward guidance on policy direction at next week’s meeting.

Concerns about dampening economic growth weighed on crude prices, outweighing the possibility of tighter supply after talks among producers stalled last week.

U.S. crude recently fell 0.97% to $ 73.84 per barrel and Brent was at $ 74.99, down 0.74% on the day.

The safe-haven dollar moved slightly higher on the concerns about the pandemic and its potential to thwart growth.

The dollar index rose 0.088%, with the euro down 0.11% to $ 1.186.