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.
A rally in tech stocks helped power the benchmark S&P 500 pass 4,000 points for the first time, rising 1 per cent at lunchtime in New York. The tech-focused Nasdaq Composite, which is stacked with growth companies whose valuations are flattered by lower market interest rates, climbed 1.4 per cent.
The yield on the benchmark 10-year Treasury, which rose sharply in the first quarter as investors bet on a jolt in inflation when economies reopened, fell 0.07 percentage points to 1.67 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.
In economic data that pointed in the opposite direction, the Institute for Supply Management revealed that US manufacturing activity soared to its highest level in more than 37 years last month.
But the jobs report was more relevant to the performance of stock and bond markets, said Christian Keller, head of economic research at Barclays, because the US central bank had signalled it was unlikely to tighten monetary policy while unemployment remained high.
“The Federal Reserve will not change its rhetoric without more evidence on how the labour market is likely to develop over the next six months,” he added.
The monthly US jobs report for March is due to be released on Friday, when American stock markets will be closed but bond desks will remain open.
The turnround in Treasuries, which this year have suffered one of the worst quarterly performances of this century, came as investors bought up the haven assets. The 10-year German Bund yield dropped 0.03 percentage points to minus 0.33 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 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.
Risks for global growth, Stupnytska added, included the possibility of more transmissible coronavirus variants, such as one identified in Brazil, spreading round Europe while vaccine rollouts remained slow.
Europe’s Stoxx 600 equity index closed up 0.6 per cent to 432.2 points, also propelled by tech shares and coming within a whisker of its pre-pandemic record high of 433.9 reached in February last year.
A further boost to tech groups has come from 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 0.3 per cent but remained around its strongest level since November last year. The euro rose 0.4 per cent against the dollar, purchasing $1.177. Sterling was up by the same amount at $1.383.