European shares at record high ahead of U.S. inflation gauge

European shares notched up another record high on Wednesday as investors looked through rising COVID infections in Asia to new highs on Wall Street, after U.S. lawmakers agreed a trillion dollar boost to the economy.

The STOXX index of 600 European companies hit a new peak for an eighth consecutive session as more acquisitions and steady corporate earnings underpinned the economic outlook.

U.S. cybersecurity company NortonLifeLock Inc said it had agreed to buy London-listed rival Avast Plc for up to $8.6 billion to create a leader in consumer security software.

Dutch bank ABN Amro said it would resume paying dividends.

The MSCI all country index was just below its lifetime high hit on Tuesday as markets held their breath ahead of the U.S. consumer price index (CPI) at 1230 GMT.

The data will likely prompt investors to update their bets on when the U.S. Federal Reserve will begin tapering or scaling back the huge stimulus it put in place to help the economy withstand the pandemic.

"Ultimately it's still an inflation story, but markets are much more comfortable with the idea of a slow move to taper bond purchases than they were say two or three months ago," said Michael Hewson, chief markets analyst at CMC Markets.

Economists polled by Reuters estimate U.S. inflation rose 5.3% in the 12 months through July, versus 5.4% in June.

"The big question at the moment is are we at peak CPI or is there more in the tank" Hewson said, adding that a strong figure could trigger a spike in bond yields and send jitters through stocks.

Reining in stimulus has been well flagged, however, meaning a repeat of the so-called "taper tantrum" of 2013 that shook markets when the Fed began putting the brakes on its quantitative easing program, is unlikely, said Ray Farris, chief investment officer South Asia, Credit Suisse.


Asian shares slipped on Wednesday as fears about the spread of the coronavirus dampened a positive lead from a record close on Wall Street.

MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.4%, with South Korea falling 0.7% and Taiwan shedding 0.6%.

"What's clearly separating Asian shares from Wall Street is the difference in vaccination. Low vaccination rates in Asia are proving to be fatal to deal with the Delta variant," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

The Delta variant of the new coronavirus is spreading quickly in many Asian countries, raising fears about local restrictions on travel and other activity hurting the economic recovery.

Japan's Nikkei bucked the trend, gaining 0.6% on brisk earnings, while Japanese bank shares benefited from higher U.S. yields.

On Wall Street, the Dow and S&P 500 closed at record highs on Tuesday as economically sensitive value stocks gained with the U.S. Senate's passage of a $1 trillion bipartisan infrastructure package, which now passes to the House of Representatives. 

The infrastructure package could provide the nation's biggest investment in decades in roads, bridges, airports and waterways.

The dollar was supported by rises in longer and shorter dated treasury yields, which reached their highest levels since mid July with yields on benchmark 10-year Treasury notes at 1.3608%.

The U.S. currency rose to a near one-month high of 110.74 yen. The euro eased to $1.1710, near a year-to-date low of $1.1703 marked in March.

Elsewhere, the stronger dollar and higher bond yields weighed on gold overnight, but the yellow metal recovered to gain 0.2%.

Oil eased slightly in Asia overnight on concerns about slower demand in China due to the spread of the Delta variant.

U.S. crude and Brent crude shrugged off their overnight losses in early European trading to edge up about 0.2%.



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