Stocks hold the line on record highs, inflation eyed

By Julien Ponthus and Julie Zhu

LONDON (Reuters) – Boosted by a $1 trillion U.S. infrastructure bill, global stock markets held the line on all-time highs on Tuesday but investors were reluctant to commit further to the rally before getting a clearer picture of the surge in U.S inflation.

The pan-European STOXX 600 rose 0.2%, just short of a record hit last week but both French and German blue chips reached new milestones in late morning trading.

MSCI’s gauge of stocks across the world edged up about 0.05%, less than a point away from uncharted highs.

Across the Atlantic, U.S. stock futures were mixed a day after Wall Street’s benchmark S&P 500 and Nasdaq extended their run of all-time closing highs to eight straight sessions.

“Markets have risen fast and strong, there’s been a vigorous rebound but the catalyst provided by the third-quarter earnings season is coming to an end,” said Emmanuel Cau, head of European equity strategy at Barclays.

Cau noted that market positioning was far from extreme and that many investors remained prudent going forward even though there was no obvious imminent threat to the rally.

He argued it was rather “healthy” to see markets pause to digest the good news provided by upbeat corporate earnings and by major central bankers in no rush to raise interest rates.

Fears of a sudden tightening of monetary policy sent fixed-income markets into a sell-off in October but government bond yields have since reversed course downwards.

“Central bank pushback against early tightening supports a pro-risk stance,” JP Morgan analysts told their clients in a note.

On Tuesday the yield 10-year Treasury notes fell to 1.465% while the German 10-year Bund, went back down to -0.275%.

Yields for both the U.S. and the euro zone benchmark are trading close to one-month lows.

Market analysts are, however, eager to get their hands on U.S. consumer prices data on Wednesday as a stronger than expected reading would rekindle talk of the Federal Reserve raising interest rates earlier than expected.

The dollar index, which tracks the greenback against a basket of six currencies, was flat at 94.04 while Japan’s yen hit a one-month high against the greenback.

Elsewhere in crypto currencies, bitcoin traded slightly off its fresh record of $68,564.

Oil prices were slightly up as the passage of the U.S. infrastructure bill and China’s export growth supported the outlook for energy demand.

Saudi Arabia’s state-owned producer Aramco also raised the official selling price for its crude.

U.S. crude ticked up 0.35% to $82.22 a barrel. Brent crude rose 0.26% to $83.64 per barrel.

Spot gold was slightly down at $1,823.800 per ounce. [GOL/]

(Editing by Lincoln Feast, Ed Osmond and Alison Williams)

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