World stocks near record high

World stock prices have held near record highs on Wednesday, while US bond yields flirted with their lowest levels in a month, as investors bet the Federal Reserve is some way off from tapering its economic stimulus.

MSCI’s all-country world index last stood at 716.64, after scaling an intraday high of 718.19 on Tuesday, led by gains in European stocks.

In Asia, the MSCI’s broadest index of Asia-Pacific shares outside Japan ticked down 0.15 per cent and Japan’s Nikkei average shed 0.25 per cent.

On Wall Street on Tuesday, the S&P500 was steady and near its record high as investors looked to Thursday’s inflation data.

The 10-year US debt yield, on the other hand, fell to 1.513 per cent, its lowest level in a month, and down a quarter of a percentage point from a 14-month peak of 1.776 per cent hit in March. It last stood at 1.533 per cent, almost flat so far on Wednesday.

“As the recovery in the job market is contained, any discussion at the Fed on tapering is unlikely to gain momentum, even if it starts soon,” said Naokazu Koshimizu, senior rates strategist at Nomura Securities.

“So those who had bet on steepening of the yield curve are unwinding their positions while some investors are also now buying to earn carry.”

US payrolls data last Friday showed job hiring did not grow as fast as economists had expected, despite growing signs of a labour shortage.

Many analysts think more evidence of strong jobs growth would be required for the Federal Reserve to step up its discussion on tapering.

The US central bank has said rises in inflation this quarter would be transient and would not threaten price stability, one of its key mandates.

Thursday’s US consumer price data is expected to show the overall annual inflation rate rose to 4.7 per cent and core inflation increased to 3.4 per cent.

While those readings will be well above the Fed’s inflation target of 2 per cent, many economists expect the inflation rate to ease in coming months, allowing the Fed to wait before taking any tapering measures.

Yet some investors remained wary that a tight labour market could lead to unexpectedly strong inflationary pressures.

“The US labour market looks really tight. At the moment, workers are not coming back for various reasons. But they will eventually return and as payrolls grow, companies will have to raise wages,” said Yoshinori Shigemi, macro strategist at Fidelity International.

Major currencies were steady.

The euro stood flat at $US1.2173 ($A1.5733), while the dollar fetched 109.50 yen.

Investors have scaled back expectations that the European Central Bank may indicate a plan to reduce its asset purchases when it reviews policy on Thursday.

Oil prices held firm after US Secretary of State Antony Blinken said that even if the United States were to reach a nuclear deal with Iran, hundreds of US sanctions on Tehran would remain in place.

US crude futures closed above $US70 ($A90) per barrel for the first time since Oct 2018 on Tuesday and last stood at $US70.21 ($A90.75), up 0.2 per cent.

Brent futures rose 0.2 per cent to $US72.35 ($A93.51), staying near their highest level since early 2020.