World stocks hit record high as bond yields ease with inflation fears

 Most Asia-Pacific share indexes followed Wall Street higher, with Hong Kong's Hang Seng leading gains in the region

By Kevin Buckland and Herbert Lash

TOKYO (Reuters) - Global equity markets rose to a fresh record high on Wednesday as bond yields eased after data showed U.S. inflation was not rising wildly.

Most Asia-Pacific share indexes followed Wall Street higher, with Hong Kong's Hang Seng leading gains in the region, while benchmark U.S. Treasury yields continued their decline, marking a fresh three-week low.

Japan bucked the trend, with the Nikkei falling 0.4% as rising coronavirus cases raised doubts about an economic reopening with 100 days to go until Tokyo is scheduled to host the Olympics.

The U.S. consumer price index rose 0.6%, the biggest increase since August 2012, as rising vaccinations and fiscal stimulus unleashed pent-up demand. But the data is unlikely to change Federal Reserve Chair Jerome Powell's view that higher inflation in coming months will be transitory.

Powell is scheduled to speak later in the day at the Economic Club of Washington.

"The market clearly braced for higher CPI readings," Westpac strategists wrote in a client note.

They said Tuesday's result was "clearly being interpreted within the context of the Fed's commitment to look through 'transitory' inflation impulses."

For bond markets, the question is whether the benchmark yield can break below 1.6% from as low as 1.611% on Wednesday, they wrote.

"That has been an important technical level, which if broken could see a quick move to 1.5%."

The 10-year U.S. Treasury yield had surged from the start of the year to a 14-month high of 1.776% on March 30 on bets that massive fiscal stimulus would speed up a U.S. recovery, stoking faster inflation than Fed policymakers anticipate.

But yields have eased this month, in part owing to the Fed's insistence that labor market slack will prevent the economy from overheating.