January 19, 2022

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US stocks close at highs after Senate passes $1tn infrastructure bill

Equities updates

Wall Street stocks closed at highs on Tuesday after the US Senate passed a $1tn infrastructure bill, while the dollar and Treasury yields rose ahead of the release of important US inflation data.

The S&P 500 index of blue-chip stocks gained 0.1 per cent in New York, notching another high. The Dow Jones Industrial Average also achieved a record close, rising 0.5 per cent. The technology-focused Nasdaq Composite fell 0.5 per cent.

The dollar edged up towards its July peak versus a basket of six rival currencies, and reached its highest since March 31 against the euro.

US government bond yields continued to rise after hawkish statements from Federal Reserve policy committee members on Monday who said that current levels of inflation could justify a step towards tightening the central bank’s ultra-loose policy. The yield on the benchmark US 10-year Treasury note on Tuesday rose to its highest level since mid-July, touching 1.34 per cent.

The US Department of Labor will on Wednesday release its monthly consumer price index figures, which are expected to show a continued rise in inflation, albeit at a slower pace than in June. The CPI print will provide investors with further clues as to how soon the Fed may roll back its ultra-loose policies, beginning with a taper of its monthly $120bn of government debt purchases.

Economists polled by Bloomberg forecast consumer prices to have ticked up 0.5 per cent in July compared with the previous month. On a year-on-year basis, the inflation rate is expected to have eased to 5.3 per cent, from 5.4 per cent in June.

In Europe, the regional Stoxx 600 index reached a closing high, up 0.3 per cent, having traded up as much as 0.5 per cent earlier in the day, led by the food-delivery services Deliveroo and HelloFresh, which have prospered during pandemic lockdowns.

In Asia, markets were mixed as the Delta coronavirus variant spreads rapidly across the region. Covid-19 infection figures in China on Monday appeared to show the most serious resurgence of the disease in the world’s second-largest economy since mid-2020. Beijing has increased testing and travel restrictions in recent days.

Hong Kong’s Hang Seng index rose 1.2 per cent and the mainland China CSI 300 gained 1.2 per cent, led by tech shares recovering ground lost in recent weeks as investors were rattled by a government crackdown. South Korea’s Kospi fell 0.5 per cent.

Oil recovered some ground after sliding more than 9 per cent over the previous six trading sessions, with the global marker Brent crude rising 2.6 per cent to $70.80 a barrel.

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