News: US equities rise to record high
US equities climbed to a record and benchmark Treasury yields extended declines to the lowest since March as investors bet that the Federal Reserve will maintain its ultra accommodative policies even after data showed consumer prices rose more than forecast last month.
The S&P 500 Index led the major American equity indices higher, rising 0.47% to 4,239.18 on Thursday (10 June) – an all-time high. The tech-heavy Nasdaq 100 Index rose to its highest level since late April as megacap technology stocks rallied. The 10Y Treasury yield fell to as low as 1.44% after initially surge in the wake of the inflation report.
The consumer price index data released Thursday showed that the increase in May was driven largely by categories associated with a broader reopening of the economy as vaccinations bring the pandemic under control. The report comes amid a debate about whether the Fed can stick to the dovish stance that has helped lift markets in the face of a strengthening economy that brings the risk of destabilising inflation. Rangebound trading in equities and falling yields had characterised the start of June as investors awaited some impetus from progress reports on the recovery. A frenzy in meme stocks and gyrations in cryptocurrencies have been among the few sources of pronounced market volatility.
Seven of the main 11 S&P 500 industry groups climbed, with health care stocks leading the advance. Financial stocks were the outliers, with large banks including JPMorgan Chase & Co Ltd, Bank of America Corporation, and Wells Fargo & Co Ltd among the biggest laggards in the broader index. Amazon.com Inc, Microsoft Corporation, and Tesla Inc contributed the most to the Nasdaq 100’s gain. The Dow Jones Industrial Average ended the session little changed at 34,466.24, with financial stocks including Goldman Sachs Group Inc and American Express Co Ltd among those weighing it down. – Bloomberg News.
The Nasdaq Composite Index upped 0.78% to 14,020.33.
Europe’s biggest airlines are seeking to deflect moves to tighten carbon curbs by favouring an increasingly discredited offsetting programme, according to climate watchdog InfluenceMap.
Carriers are pushing to retain the Carbon Offsetting and Reduction Scheme for International Aviation over the European Union’s (EU) more rigorous Emissions Trading System, the think tank said Thursday (10 June). While Corsia was developed by the United Nation-mandated International Civil Aviation Organization, a recent EU report said offsets are priced too cheaply to act as a brake on emissions.
Planemaker Airbus SE meanwhile told EU officials in February that hydrogen-powered aircraft with more than 150 seats probably would not feature globally until 2050, according to a presentation obtained by InfluenceMap via a freedom of information request.
Carriers are also urging the EU to delay moves to sustainable aviation fuel (SAF), it said, with Air France-KLM backing compulsory use only as technology matures, Deutsche Lufthansa AG claiming competitiveness issues, and British Airways owner IAG SA saying SAF should be required only for intra-Europe flights.
The International Air Transport Association said the report was a distortion of “genuine and long-standing sustainability efforts”, while A4E, which represents Europe’s leading airlines, said it failed to reflect the actions and investments of a sector that contributes 2.4% of total global emissions.
The dissection of the aviation industry’s stance on carbon curbs highlights how pressure to accelerate efforts to meet increasingly tougher climate goals has ratcheted up. While automakers and some industrial sectors have made strides toward slashing emissions, airlines face a tougher challenge in going green given the energy expenditure required to get passenger jets airborne.
Airlines are also utilising the coronavirus crisis, which has roiled air travel, in an effort to delay taxes designed to push them into reducing emissions, according to InfluenceMap, which said it researched Europe’s 10 largest operators, together with Airbus, The Boeing Company, and leading trade groups. Only EasyJet Plc has shown “more positive engagement” with the issue, it said. – Bloomberg News.
The Stoxx Europe 600 closed little changed at 454.56 on Thursday.
Japan’s biggest bank is planning to plow about USD9b into a new investment team that will look to buy credit, equities, and alternative assets in a bid to lift investment returns.
Mitsubishi UFJ Financial Group (MUFG) Inc expects to begin buying the assets in the second half of this year that will likely focus on US securities, said the group’s head, Yoshiaki Nemoto. His team will manage a new investment account, separate from the bank’s conventional securities portfolio, and will aim to grow assets to about JPY1t (USD9.1b) within three years, he said.
“We need to consider ways to boost returns,” Nemoto said in an interview, as low global interest rates endure at the same time as a hefty surplus of bank deposits.
Other banks in Japan have signalled efforts to seek higher yielding assets as lenders face a sharp build-up in excess cash amid the pandemic. MUFG’s move is among the largest and may bring with it scrutiny from investors.
Nemoto said his team emphasises diversification, and will consider buying assets such as real estate investment trusts in addition to equity and corporate bond funds. He said while the portfolio will be geographically varied, the US is likely to make up a large portion given its relatively bigger market size.
Nemoto said risk control is critical for the team and that is why the build-up in assets will be a slow process at the beginning.
“It’s not easy,” he said. “There are attractive assets, but we will make investments after doing due diligence and building a solid risk management system.” – Bloomberg News.
The Nikkei 225 Index opened 0.28% higher at 29,039.00 on Friday (11 June), adding to Thursday’s 0.34% gain to 28,958.56.
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