Stocks on Wall Street were on track to end a three-day losing streak, as investors mulled over the possibility of rising inflation rippling through capital markets.
The blue-chip S&P 500 index rose 0.3 per cent at the opening bell while the technology-focused Nasdaq Composite gained 0.5 per cent.
The prospect of US president Joe Biden’s $1.9tn stimulus plan has led to a sell-off in US government debt on concerns that the fiscal injection will feed through to higher inflation, which erodes the value of bonds’ coupons. That has eaten into the price of US Treasuries since November’s election, pushing up yields.
On Friday the yield on the 10-year note climbed 0.04 percentage points to 1.33 per cent, returning to a 12-month high hit earlier this week. But concerns remain that the higher yields will undercut the rally in riskier assets, said Jim Reid, research strategist at Deutsche Bank, noting the multiple highs US stocks indices have hit this year.
In Europe, the region-wide Stoxx 600 climbed 0.6 per cent by the mid-afternoon, while London’s FTSE 100 index rose 0.3 per cent and Frankfurt’s Xetra Dax was 0.8 per cent higher.
Oil prices remained near their highest levels since January 2020 despite the recent rally losing steam. Brent crude, the international benchmark, slid 0.1 per cent to near $64 a barrel.
According to Reid, prices were being weighed down by the recommencing of Texas oil production and news that the White House was willing to negotiate with Iran over a return to the nuclear deal, a move that could pave the way for a rise in the country’s crude exports.
Sterling advanced 0.3 per cent against the dollar crossing $1.40 — its highest level since March 2018.
“Sterling has been undervalued since the period before the Brexit referendum, and now there is a general view that the UK is ahead of Europe in terms of its response to Covid-19,” said Savvas Savouri, chief economist at Toscafund Asset Management.
The lockdown, however, continues to weigh on the UK economy. The latest figures from the Office for National Statistics showed British retail sales fell sharply this month. The volume of sales between December and January slid 8.2 per cent, which was double the decline in sales between November and December.
In Asia, China’s CSI 300 index gained 0.2 per cent, as did Hong Kong’s Hang Seng index, while South Korea’s Kospi 200 added 0.8 per cent.