WASHINGTON: Global stock markets hovered near record highs on Wednesday despite wary investors remaining unconvinced by central bank assurances that the current inflation upsurge is transitory.
US equities inched higher at the open as some high valuations, including of so-called "meme stocks", fed into investor sentiment.
The mood on Wall Street is likely to be less buoyant than a day prior as traders waited for crucial US jobs data later this week to assess what the increasing evidence of a faster-than-expected economic recovery would mean for central bank policy in the United States and Europe.
A strong expansion in US and European factory activity in May had lifted world shares to record highs on Tuesday.
The pan-European STOXX 600 index rose 0.16% and MSCI's gauge of stocks, which tracks shares in 50 countries, gained 0.09%.
"Investors are stuck in the summer doldrums, with markets struggling to find direction as much of the good economic news is priced in. Inflation and job growth will continue to be debated - with the Fed and many bond market investors confident that price increases will remain temporary, while others will cast a more skeptical eye on the conversation," said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.
The Dow Jones Industrial Average rose 83.13 points, or 0.24%, to 34,658.44, the S&P 500 gained 9.55 points, or 0.23%, to 4,211.59 and the Nasdaq Composite added 21.28 points, or 0.15%, to 13,757.75.
Crude oil prices rallied again after closing above $70 a barrel for the first time in two years, aided by investors wagering that the economic recovery will lift energy demand and that supply will fall behind.
US crude recently rose 0.43% to $68.01 per barrel and Brent was at $70.65, up 0.57% on the day despite OPEC+ oil producers agreeing to hike output in July.
Mark Haefele, chief investment officer at UBS, Global Wealth Management, said vaccination rollouts would spur "a return to normal patterns of mobility, supporting energy demand", while support for prices also came from an OPEC showing discipline about production increases.
"We see energy firms as among the main beneficiaries of the broader global reflation trend, along with financials," he said.
While broader stock markets remain close to record highs, the momentum of earlier in the year has ebbed as investors begin to worry a stronger-than-expected rebound from COVID-19 means higher inflation and sooner-than-expected monetary policy tightening.
Economies are recovering much faster than anticipated - data on Wednesday showed Australia's economy racing ahead last quarter as consumers and businesses spent with abandon, lifting output back above where it was last year before the pandemic.
SHRUGGING OFF INFLATION DATA
While investors have built sizeable short positions against the US dollar more broadly, they are worried over a potential hawkish tone from the Federal Reserve at its meeting later in June, and traders are reluctant to send the greenback much lower.
Benchmark 10-year notes last rose 7/32 in price to yield 1.5909%, from 1.615%
Euro zone yields have largely shrugged off Tuesday's data showing euro zone inflation rose to 2% in May - a sign that markets were confident the European Central Bank would not decide to slow the pace of its bond buys when it meets on June 10.
"Keep a close eye on the US 10-year treasury note - as long as rates stay safely below 2% percent, then relative calm should reign in the stock markets, but a sharp rise in rates could cause a more violent rotation out of tech and communication services and into financials and materials," added Independent Advisor Alliance's Zaccarelli.
Later on Wednesday, investors will turn to the Fed's Beige Book report, which will give a glimpse of the state of the economy based on conversations with business contacts.