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U.S. government bond prices softened and Wall Street shares failed to raise all-time highs last week as traders were cautious ahead of a two-day meeting of the US central bank starting Tuesday.
After a concentration last week, as investors bet on the Federal Reserve seeking high US inflation to maintain pandemic-era support for financial markets, the 10-year benchmark Treasury bond yield rose 0.02 percentage points, up to 1.85%.
Wall Street’s S&P 500 stock index fell 0.3% below first operations in New York after breaking the record on Friday. The technology-focused Nasdaq Composite index rose 0.1 percent. The Stoxx Europe 600 also gained 0.1%, of course, to achieve a new closing high.
The Fed is widely expected to hold $ 120 billion in monthly bond purchases that have eased financial conditions for businesses and households since March last year.
These asset purchases, followed by interest rate regulators in Europe and the United Kingdom, have reduced government bond yields, reduced corporate borrowing costs and increased the attractiveness of riskier assets, such as income. variable.
However, after a rapid recovery in the U.S. economy driven by coronavirus vaccines and President Joe Biden’s massive stimulus programs, some analysts see Fed policymakers presenting their predictions on the first increase in the post-pandemic interest rate.
“We expect the Fed to update its growth outlook and materially revise inflation forecasts,” Tiffany Wilding, U.S. economist at Pimco Bond Investment House, said in a research note. “We believe most Fed officials will also push through their projections for the first rate hike until 2023 [from 2024]”.
Fed Vice President Richard Clarida last month he called for a debate on reducing central bank asset purchases like the US recovery accelerated.
“Hopefully there will be talk of a future discussion on volume reduction,” said Grace Peters, investment strategist at JPMorgan’s private bank. “With the real taper that will start early next year.”
The FTSE All-World index of developed and emerging market shares has hovered around its all-time high for weeks as investors take a wait-and-see approach to the long-term path of monetary policy.
U.S. consumer price inflation has arrived 5 percent in the twelve months to May. Fed Chairman Jay Powell has said the rises are a temporary effect of the reopening of the U.S. economy following coronavirus shutdowns. “But others are concerned that inflation is more structural,” said Marco Pirondini, Amundi’s U.S. equity chief. “I’d say it’s 50 to 50 on both sides.”
A rise in the price of used vehicles and trucks, after the global shortage of semiconductors reduced production of new vehicles, accounted for about a third of the May CPI increase, according to the Bureau of Labor Statistics.
But U.S. wages could also “rise in a more sustained way,” Pirondini said after Biden signed an executive order in late April to increase government pay, pressuring private industry to raise wages as well.
The dollar index, which measures the U.S. currency relative to that of trading partners, fell 0.1 percent. The euro rose 0.2% against the dollar, buying $ 1,212. The pound rose 0.1%, to $ 1,411. The dollar index has gained 0.7% this year, and currency traders are also expecting a clearer picture of the future path of US monetary policy.
Brent crude, the international benchmark for oil, gained 1% to $ 73.39 a barrel.
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