Stocks open higher; bond yields rise after inflation jumps

AP – Stocks are opening higher on Wall Street yesterday, nudging the S&P 500 back into the green for the week. The benchmark index was up 0.6 per cent in the early going, and the tech-heavy Nasdaq was up 0.4 per cent.

Treasury yields rose after the government reported that consumer prices jumped five per cent in May over a year ago, the biggest 12-month spike since 2008. That was more than economists had expected.

As the economy emerges from its pandemic-induced recession, investors are trying to determine whether inflationary pressures will be transitory or longer-lasting. The yield on the 10-year Treasury note rose to 1.51 per cent.

“There’s a sense of every man for himself ahead of the United States (US) inflation data this evening, a data point that has left markets in limbo and seems to be taking an interminably long time to arrive,” Jeffrey Halley of Oanda said in a report.

The European Central Bank was expected to leave its stimulus efforts running at full steam at a policy setting meeting yesterday – even as the economy shows signs of recovery thanks to the easing of pandemic restrictions.

Markets are also watching for developments from a summit of the Group of Seven in Britain. At the top of the leaders’ agenda is helping countries recover from the coronavirus pandemic, which has killed more than 3.7 million people and wrecked economies.

People wearing face masks walk past a bank’s electronic board showing the Hong Kong share index in Hong Kong. PHOTO: AP

The G7 leaders are meeting for three days at a British seaside resort. It’s the first such gathering since before the pandemic.

Relations with China are another key concern, as Beijing and Washington remain at odds over trade and technology policies heading into the fourth year of a tariff war.

The Labor Department’s release of the consumer price index comes shortly before a meeting next week of the Federal Reserve’s Open Market Committee, which sets policy on interest rates and other measures.

Investors are focussing on how US inflation data might impact ultra-low interest rates and other market-supporting policies. Recent price increases have raised worries that price hikes might not be temporary and might prompt the Federal Reserve to raise interest rates.

But so far officials have said inflation is likely elevated because prices plunged during the downturn due to the pandemic early last year. They expect that “base effect” to ease in coming months.

Germany’s DAX edged 0.1 per cent lower to 15,564.78 while the CAC 40 in Paris lost 0.2 per cent to 6,550.87. In Britain, the FTSE 100 picked up 0.3 per cent  to 7,099.18.

US futures were little changed, with the contract for the Dow industrials up 0.1 per cent and that for the S&P 500 barely changed.

In Asian trading, Tokyo’s Nikkei 225 rose 0.3 per cent to 28,958.56 and the Kospi in South Korea picked up 0.3 per cent to 3,224.64. In Hong Kong, the Hang Seng shed less than four points to 28,738.88, while the Shanghai Composite index advanced 0.5 per cent to 3,610.86. Australia’s S&P/ASX 200 gained 0.4 per cent to 7,302.50.