published Feb 15th 2017, 8:13 pm, by Adam Haigh and Chikako Mogi

(Bloomberg) —
Reflation fever failed to spread to Asian hours after global equities soared to the highest level on record.

Stocks in Tokyo fell as the yen jumped and U.S. Treasuries climbed after five straight days of declines. The moves came after the MSCI All-Country World Index closed at an all-time high on Wednesday. Evidence of firming U.S. inflation had spurred bets that the economy can withstand higher interest rates as it waits for stimulus from the Trump administration. The dollar slipped against most major currencies.

World equities have jumped in value to more than $70 trillion after a rally since Donald Trump’s election that has been spurred by optimism for stronger U.S. economic growth. A technical indicator showed MSCI’s broadest measure of global equities might have become overbought.

Wednesday’s data lifted the odds for a Fed rate hike in March to 42 percent from 30 percent two days ago, helped by Fed chair Janet Yellen’s testimony that the central bank doesn’t need to wait for Trump to outline plans on fiscal stimulus before resuming rate hikes. U.S. year-on-year inflation reached 2.5 percent for January, the fastest pace since 2012.

Before Yellen’s testimony, traders had anticipated the Fed would start raising U.S. borrowing costs in June. Now they see one as early as May, according to futures data compiled by Bloomberg. Data this week also showed factory price increases accelerated in China.

Here are the main moves in markets:

Stocks

Japan’s Topix fell 0.3 percent at 11:11 a.m. in Tokyo, after fluctuating between gains and losses earlier in the day. Australia’s S&P/ASX 200 Index fell 0.1 percent. New Zealand’s S&P/NZX 50 Index lost 1 percent from the highest level since October. Hong Kong’s Hang Seng was flat, erasing an earlier gain of 0.7 percent. The Hang Seng China Enterprises Index fell 0.1 percent, after Wednesday’s 1.9 percent surge. Futures on the S&P 500 fell 0.1 percent after the benchmark index rose 0.5 percent and the MSCI All-Country World Index added 0.6 percent on Wednesday.

Currencies

The yen rose 0.3 percent to 113.84 per dollar, after snapping a 0.9 percent decline on Wednesday. The Bloomberg Dollar Spot Index lost 0.1 percent after slipping 0.2 percent on Wednesday, halting a four-day advance. The Aussie rose 0.1 percent, trading at the highest level since Nov. 10, after climbing 0.6 percent on Wednesday. The unemployment rate unexpectedly fell in January, despite a plunge in full-time jobs, underscoring the mixed picture of the country’s labor market. South Korea’s won climbed 0.4 percent to near a three-month high.

Bonds

The yield on 10-year Treasuries dropped one basis point to 2.48 percent after increasing for a fifth day on Wednesday. Australian 10-year yields rose for a fifth straight session, adding one basis point to 2.80 percent.

Commodities

Oil retreated 0.1 percent, trading near $53 a barrel after a government report showed U.S. crude inventories rose to the highest levels in weekly data going back to 1982. Gold climbed for a third day, gaining 0.2 percent to $1,236.24 an ounce.

–With assistance from Jeremy Herron.To contact the reporters on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net ;Chikako Mogi in Tokyo at cmogi@bloomberg.net To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net Garfield Reynolds

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