Stocks Hit Record Today, Bonds Drop on Reflation Trade

Stocks reached a record today, equity futures advanced and U.S. Treasury yields rose after Janet Yellen pushed for rapid U.S. stimulus and coronavirus infections slowed across the globe. The dollar steadied after Friday’s slide.

U.S. and European contracts climbed after the S&P 500 closed at an all-time high Friday. Japan’s Topix index ended Monday at the highest since 1991 amid reports the government may lift its state of emergency early for some areas.

Treasury Secretary Yellen said on Sunday talk shows that the U.S. can return to full employment in 2022 if it enacts a robust enough relief package. Ten-year Treasury yields rose, while the pace of U.S. inflation implied by the bond market accelerated to the fastest since 2014. Brent crude topped $60 a barrel.

Investors are taking comfort from the continued rollout of vaccines and data suggesting a declining trend in infections in countries like the U.S. A Citigroup Inc. gauge of global risk aversion dropped to its lowest since the pandemic first roiled markets last year. Weaker-than-forecast U.S. jobs data Friday reinforced economic risks as the pandemic lingers, but also highlighted the case for further stimulus.

“Risk sentiment brightened as anticipation over the U.S. stimulus package is growing,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co. “Although the scale of the U.S. package is likely to be reduced, the amount will be still substantial to bolster the U.S. economy.”

President Joe Biden is pushing for a mammoth $1.9 trillion economic relief measure. Some commentators, such as former Treasury Secretary Larry Summers, have raised questions about the size of the package and risks such as much faster inflation.

S&P 500 futures added 0.4% as of 7:11 a.m. in London. The gauge rose 0.4% on Friday.Japan’s Topix index rose 1.8%.Hong Kong’s Hang Seng Index advanced 0.3%.South Korea’s Kospi index fell 0.9%.Australia’s S&P/ASX 200 Index rose 0.6%.Shanghai Composite Index rose 1%.Euro Stoxx 50 futures gained 0.7%.

Earnings season continues with companies including Honda Motor, Cisco Systems, Societe Generale and L’Oreal.EIA crude oil inventory report comes Wednesday.Sweden will set monetary policy on Wednesday.Federal Reserve Chair Jerome Powell will speak on a webinar Wednesday.

The U.S. consumer price index comes Wednesday.Lunar New Year public holidays begin in nations across Asia, with China breaking for a week.Bank of Russia’s policy decision comes Friday. The yield on 10-year Treasuries rose two basis points to 1.18%.Australia’s 10-year yield advanced more than seven basis points to 1.27%.

Stocks Hit Record Today, Bonds Drop on Reflation Trade via @marketinvestor
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