Treasury yields jumped after Jerome Powell said the US Federal Reserve will remain accommodative and shift to a more relaxed approach on inflation. US and European stock futures rose along with most Asian equities.
The yield premium demanded by investors on long-maturity US debt compared to short-term notes increased to the most in two months after Mr Powell, Chairman of the Federal Reserve, said it will seek inflation that averages 2 per cent over time, a step that implies allowing for periods of overshoots.
Australia’s 10-year bond yield breached 1 per cent on Friday for the first time since June as other sovereign notes fell.
Stocks rose in Japan, aided by banks. South Korean shares outperformed, China and Hong Kong posted modest gains, but Australia slid. US and European contracts climbed. The S&P 500 on Thursday reached a fresh all-time high. The Nasdaq Composite also set a record before closing in the red. The dollar edged lower, erasing some of Thursday’s advance.
“Monetary policy is likely to stay accommodative for even longer,” said Tai Hui, chief Asia market strategist at JPMorgan Asset Management. “Not only will the Fed need to provide sufficient support to help the economy through the pandemic fallout, but also policy rates should be kept low beyond that to generate sufficient inflationary pressure.”
Global stocks are heading for a fifth week of gains as technology shares continue to push higher and investors monitor progress on vaccine developments for the pandemic. Reports showed that US weekly jobless claims remained above 1 million and the economy contracted slightly less than forecast in the second quarter.
Elsewhere, crude oil declined as Hurricane Laura weakened while crossing over land in the refinery and LNG-rich Gulf of Mexico region. Gold rose after earlier declining more than 1 per cent.
