U.S. stock futures buoyant on inflation view

LONDON (Reuters) – U.S. stock futures were buoyant before the open on Friday after the S&P 500 rose to a record on Thursday on easing inflation fears, and world stocks also scored a record high.

Federal Reserve Chair Jerome Powell signalled at an International Monetary Fund event that the central bank was nowhere near reducing support for the U.S. economy, saying that while economic reopening could result in higher prices temporarily, it will not constitute inflation.

The comments followed data on Thursday showing an unexpected rise in the number of Americans filing new claims for unemployment benefits.

E-mini futures on the S&P 500 were flat, while Nasdaq futures dipped 0.2%.

“As long as monetary stimulus is easy, as long as fiscal policy is easy, any hiccups in stocks are probably only going to find buyers,” said Giles Coghlan, chief currency analyst at HYCM.

Investors have pumped more money into equities over the past five months than in the last 12 years, BofA’s weekly flow figures showed on Friday.

MSCI’s broadest gauge of world stocks was flat after hitting a record high in Asian trading. The index has gained 1.6% this week.

Britain’s FTSE 100 rose to its highest in more than a year, bringing gains for the week to nearly 3%, helped by the country’s speedy vaccine rollout.

European stocks were flat but remained on course for their longest weekly winning streak since November 2019, as hopes of a rapid recovery in economic growth offset doubts over the euro zone’s COVID-19 vaccination programme.

Euro zone authorities should only withdraw their monetary and fiscal stimulus gradually, European Central Bank Vice President Luis de Guindos said on Friday.

Benchmark 10-year Treasury yields held close to Thursday’s two-week trough near 1.6%. Yields had surged to their highest since January 2020 at 1.776% at the end of March on inflation fears.

Deutsche Bank analysts said Powell’s comments “offered fresh reassurance to investors who’d begun to price in earlier rate increases on the back of some very strong economic data in recent weeks”.

Federal Reserve Bank of Dallas President Robert Kaplan speaks later on Friday.

German 10-year bond yields rose 4 basis points, moving away from the previous session’s 10-day lows. Mixed economic data from Germany showed a rise in exports in February but a surprising decline in industrial output.

The U.S. dollar index gained 0.2% but was set for its worst week of the year, weighed down by the lower Treasury yields. The euro dipped 0.2% after hitting two-week highs in the previous session.

Graphic: Dollar set for worst week of the year

The pound was also on track for its biggest weekly loss of the year, hit by profit-taking after a strong first quarter.

The CBOE volatility index was steady after falling to its lowest since Feb 2020 on Thursday at 16.55. Easing volatility will support risk appetite, said analysts at Unicredit.

“The level of uncertainty regarding COVID-19-related developments and their impact on economic activity remains elevated, but risks seem balanced,” they wrote in a client note.

In emerging markets, Norway’s finance ministry said the country’s $1.3 trillion sovereign wealth fund, the world’s largest, should not include Saudi Arabian companies in the reference index governing the fund’s investment, because of environmental, social and corporate governance (ESG) risk.

In Asia, Japan’s Topix gained 0.6%, Australian stocks hovered near a 13-month high and South Korea’s Kospi touched the highest intraday level since mid-February.

Chinese shares, however, slid 1.5%, as robust domestic inflation data raised worries over policy tightening. Factory gate prices rose at their fastest annual pace since July 2018 in March.

Oil prices edged lower as supplies from major producers grew and concerns remained over a mixed picture on the COVID-19 pandemic’s impact on fuel demand.

U.S. crude fell 0.1% to $59.57 a barrel. Brent lost 0.2% to $63.09 a barrel.

Spot gold fell 0.6% to $1,745 an ounce after jumping to a more than one-month peak of $1,758 on Thursday.

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