* US 10-year yield reaches top 13 months
* Gold changed little, bitcoin is falling
* Crude Oil Falls After Two Strong Weekly Gains (Price Updates, Notes)
NEW YORK, March 12 (Reuters) – An index of stocks around the world fell Friday but is set to post its strongest weekly gain in five years as government bond yields rose to a 13-month high, partly driven by optimism after a $ 1.9 trillion recovery package has been signed into law.
Gains in the Shanghai and Tokyo stock markets proved difficult to match in Europe and on Wall Street, where banks were the silver lining and the Nasdaq underperformed as the rotation from growth to value continued. The Dow Industrials hit an all-time high.
The spike in government bond yields supported the dollar, while the sell-off in stocks shed light on the greenback’s appeal.
Against the backdrop of hugely lenient monetary policy, some analysts expect inflation to pick up as vaccine rollouts lead to economies reopening, raising concerns that the stimulus package could overheat the US economy.
US President Joe Biden signed the stimulus bill before delivering a televised address on Thursday evening pledging aggressive action to speed up vaccinations and bring the country closer to normalcy by July 4.
“We’re back to the idea that more growth is more inflation and investors are a bit nervous about the current levels of returns affecting technology stocks,” said Victoria Fernandez, chief market strategist at Crossmark Global Investments in Houston.
“It’s all about the pace of revenue growth and the market appears to be comfortable with an additional 10-20 basis points increase in benchmark revenue when supported by strong data showing economic recovery.”
The Dow Jones Industrial Average rose 233.39 points, or 0.72%, to 32,718.98, the S&P 500 lost 3.36, or 0.09%, to 3,935.98 and the Nasdaq Composite dropped 111.26 points , or 0.83%, to 13,287.42.
The pan-European STOXX 600 index lost 0.26% and the MSCI measure for stocks around the world fell 0.17%.
Emerging markets equities lost 0.76%. Overnight, MSCI’s widest index of Asia-Pacific stocks outside Japan closed 0.69% lower, while Japan’s Nikkei rose 1.73%.
10-year US Treasury yields rose above 1.6% and were on track to make their seventh consecutive weekly rise.
“The bias in tariffs is even greater, barring an unforeseen setback from the vaccines or explicit action by the Fed,” said Gregory Faranello, head of US tariffs at AmeriVet Securities in New York.
US producer prices recorded their largest annual increase in almost 2-1 / 2 years in February, but the still high unemployment rate could make it more difficult for businesses to pass on the higher costs to consumers.
Benchmark 10-year bonds last fell 30/32 in price to return 1.6317%, up from 1.527% late Thursday.
The recent, sharp market moves give even more importance to next week’s meeting of the US Federal Reserve for clues to its views on rising interest rates and the threat of inflation.
In the currency markets, the dollar index rose 0.244%, while the euro fell 0.28% to $ 1.1951.
The Japanese yen weakened 0.51% against the greenback at 109.04 a dollar, while the pound was last traded at $ 1.3923, down 0.48% one day.
Markets are likely to remain volatile in the second quarter, especially for the dollar, which was much stronger than expected at the start of the year, said Cliff Zhao, chief strategist at China Construction Bank International.
“The strong US dollar could weigh on some of the liquidity conditions in emerging markets,” he said.
The Institute of International Finance urged the Fed on Thursday to advise on how to manage higher yields to prevent further outflows from emerging markets.
Oil prices fell and both Brent and WTI struggled to maintain a positive weekly performance after rising more than 10% in the past two weeks.
On Friday, US crude oil fell 0.53% to $ 65.67 a barrel and Brent was down $ 69.22, down 0.59% one day.
Spot gold added 0.1% to $ 1,722.56 an ounce. Silver fell 0.79% to $ 25.87.
Bitcoin last fell 1.43% to $ 56,947.33.
Reporting by Rodrigo Campos; additional reporting by Shashank Nayar and Medha Singh in Bengaluru, John McCrank and Gertrude Chavez-Dreyfuss in New York, and Shadia Nasralla in London Edit by Nick Zieminski