Stocks rise with US equity futures on Wednesday as concerns over valuations eased and the focus turned back to the stimulus-fuelled recovery from the pandemic. Treasury yields edged higher.
The Stoxx 600 Index climbed for a third straight session, with UK shares outperforming after UK Chancellor of the Exchequer Rishi Sunak extended furlough pay for workers ahead of presenting the country’s budget.
US equity futures rebounded from Tuesday’s losses, with contracts on the tech-heavy Nasdaq gauge leading gains. Shares outperformed in Hong Kong and China and climbed in Australia, where data showed the economy maintained its rapid recovery in the final three months of 2020. Oil edged higher after a three-day fall.
The V-shape recovery coming into sharp relief in Australia highlighted expectations for a global rebound that boosts earnings and supports the run up in stocks. At the same time, investors remain wary of a widespread jump in inflationary pressures that could shake confidence by undercutting pledges from central banks to keep monetary policy loose.
“Real yields are still pretty negative and it’s still really easy monetary policy,” said Kathy Jones, chief fixed income strategist at Charles Schwab. “As we normalize and move away from a market dominated by central banks and policy, to one that is more driven by supply and demand, there’s going to be bouts of volatility.”
The swings in fixed income that roiled markets last week have moderated, but the outlook for longer-term borrowing costs and real yields remains a major point of debate.
“If interest rates start moving higher and quicker than expected, then there’s a chance there might be more significant pullback in the market,” Katerina Simonetti, Morgan Stanley Private Wealth Management senior vice president, told Bloomberg TV.
Elsewhere, Bitcoin rises back above $49,000.
Futures on the S&P 500 Index climbed 0.7% as of 8:16 am London time and the Stoxx Europe 600 Index increased as much as 0.7%.
While the MSCI Asia Pacific Index gained around 1.3%, the MSCI Emerging Market Index advanced 1.7%.
The Bloomberg Dollar Spot Index was little changed and the euro dipped 0.1% to as much as $1.2084.
While the British pound advanced 0.2% to $1.3978, the onshore yuan strengthened 0.2% to 6.46 per dollar and the Japanese yen weakened 0.1% to 106.83 per dollar.
The yield on 10-year Treasuries jumped three basis points to 1.42% and the yield on two-year Treasuries climbed less than one basis point to 0.12%.
While Germany’s 10-year yield increased one basis point to -0.35%, Britain’s 10-year yield advanced one basis point to 0.701%. Japan’s 10-year yield declined one basis point to 0.119%.
West Texas Intermediate crude climbed 0.4% to $59.99 a barrel and Brent crude increased 0.4% to $62.96 a barrel. Gold weakened 0.5% to $1,729.51 an ounce.