US stocks hit a new record, propelled higher by technology shares, while government bonds rallied in the return of a popular pandemic trade that banks on continued social curbs and supportive monetary policy.
The benchmark S&P 500 index gained 0.7 per cent, with tech stocks rising to the top of its leaderboard, to hit a record 4,000 points. The technology-focused Nasdaq Composite, which is stacked with growth companies whose valuations are flattered by lower market interest rates, opened 1.5 per cent higher.
The yield on the benchmark 10-year Treasury note, which rose sharply in the first quarter as investors banked on the reopening of economies causing a jolt of inflation, fell 0.05 percentage points to 1.697 per cent.
The rally in Treasuries picked up slightly after a report showed new claims for unemployment benefits rose by 61,000 last week to 719,000, a higher reading than the 680,000 Wall Street economists had forecast.
While filings had peaked at 6.87m during the early days of the Covid-19 crisis last year, the data highlight the stresses the world’s biggest economy continues to grapple with in the face of an uneven recovery from the pandemic.
The closely watched monthly US jobs report for March is due to be released on Friday. While the American stock market will be closed that day for the Good Friday holiday, bond desks will be open.
The turnround in Treasuries, which during the first quarter put in one of their worst three-month performances of this century, came as investors bought up the haven assets, which are traditionally used in portfolios to cushion against economic shocks. The 10-year German Bund yield dropped 0.03 per cent to minus 0.326 per cent. Bond yields move inversely to prices.
As the coronavirus emergency worsened in Europe, French president Emmanuel Macron announced a four-week national lockdown on Wednesday evening and Italy extended its curbs to the end of April. Canada’s Ontario province will also start a 28-day lockdown from Saturday.
For much of the past year, investors in equity and bond markets have swung between optimism about a post-pandemic surge in global growth and caution that the reopening of developed economies remains a long way off.
“A lot of optimism has been priced in [to markets] since the start of the year, but it is clearly possible that we will not see the perfect reopening scenario in the second half,” said Anna Stupnytska, global macro economist at Fidelity International.
Investors, Stupnytska said, were now more alert to the risks of the third wave of coronavirus in Europe and the possibility of more transmissible variants, such as one identified in Brazil, spreading round the bloc while vaccine rollouts remained slow.
Europe’s Stoxx 600 equity index added 0.5 per cent to 431.7 points, propelled upwards by technology shares and coming within a whisker of its pre-pandemic record high of 433.9 reached last February.
Tech companies have also been boosted by US president Joe Biden’s $2tn infrastructure spending plan, announced on Wednesday, which included large proposed investments in scientific research and broadband.
The dollar, as measured against a basket of major currencies, dipped 0.2 per cent but remained around its strongest level since November last year. The euro rose 0.1 per cent against the dollar, purchasing $1.174. Sterling was up by the same amount at $1.378.