WASHINGTON- World stocks climbed higher on Monday as investors digested new optimism from the US Treasury’s top economist that inflationary pressures should ease in 2022 due to weaker demand for goods, easing supply bottlenecks and a receding coronavirus pandemic.
Wall Street closed higher on Monday, coupled with an earlier rise in European shares, that helped stabilize investor sentiment after a series of volatile sessions.
In a statement released alongside the Treasury’s quarterly borrowing estimates, Assistant Secretary for Economic Policy Ben Harris said he expects energy prices to stabilize in 2022, but geopolitical instability could push prices higher.
Still, investors said the backdrop for equities remains uncertain as other central banks tighten policy – the Bank of England is expected to hike rates again on Thursday – and another jolt higher in oil prices adds to inflationary worries.
The pan-European STOXX 600 index rose 0.72 percent.
Lunar New Year holidays made for thin trading conditions in Asia. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.11 percent higher.
On Wall Street, the Dow Jones Industrial Average rose 1.18 percent, while the S&P 500 gained 1.89 percent. The tech-heavy Nasdaq added 3.41 percent, but has borne the brunt of selling and is down 14 percent from a record peak last year.
The MSCI World index, while higher on Monday, remains down 6.2 percent in January – the worst start to the year since 2016. Before Friday’s rebound, the index had been headed for its worst January since the global financial crisis in 2008. It last gained 1.8 percent
“This is not the classic selloff affecting lower quality underperforming companies. This selloff is driven not by fundamentals but by the action of central banks at a time when growth is very strong,” said Flavio Carpenzano, investment director at Capital Group.
