LONDON (Reuters) – Global stock markets rose on Wednesday following an astonishing restart of US technology stocks as benchmark dollar and government yields rose ahead of a key US Treasury bid and inflation reading. Late.
But earnings fell after a 20% rise in Tesla electric vehicles on Tuesday, up 4% on the Nasdaq and the biggest one-day gain for Amazon and Microsoft in the world in more than a month.
Asia has returned from a two-month low, while China’s markets have given up on recent central bank policies, which have raised concerns, and Europe has been helped at first by a new all-time high for the German DAX.
Dollar and bond yields also rose. Traders later focused on the US bond auction and inflation data, as well as Thursday’s European Central Bank meeting, which is expected to respond to the recent jump in borrowing costs.
Mikhail Zverev, head of global equities at Aviva Investors, said Tuesday’s wild moves in major U.S. technologies highlighted how volatile markets, which are increasingly dominated by larger passive funds, are likely to be this year. as people try to reset after the COVID -19 pandemic.
“The wind is blowing harder now. The world is not a more dangerous place, a slight increase in interest rates is not a cataclysmic event … but there is now a large herd mentality with a greater inclination for rotations “, he said.
“It moves more often, moves faster and leaves a mark of inefficiency,” leaving markets vulnerable to large fluctuations, he added.
Overnight gains on Asian stocks came after Chinese stocks fell to their lowest levels since mid-December the day before, ahead of a tighter policy and a slowing economic recovery.
News that a $ 1.9 trillion coronavirus rescue package was nearing final approval on Monday triggered an overall increase in bond yields. This pushed the Nasdaq up more than 10% below its February 12 closing level, confirming a correction in the index.
The yield on 10-year benchmark banknotes was 1.540%, reaching a high of 1.626% on Friday, after Tuesday’s $ 58 billion auction in US 3-year banknotes was well received.
However, many market investors remained at the limit, with the next tests of investors’ appetite for government debt to be launched later this week in the form of 10- and 30-year auctions.
“Although the bond market has stabilized slightly, pressure will remain,” said Naokazu Koshimizu, a senior strategist at Nomura Securities.
“He assessed the future monetary policy normalization of the Fed, with the Fed’s policy eventually becoming neutral. But he has not yet set a price for the chance for his policy to tighten. ”
INFLATION PALACES
Some investors see a real risk of an overheated US economy and higher inflation behind the planned increase in government spending.
US consumer price data at 1330 GMT is expected to show a slight acceleration in global inflation in February, with analysts expecting new gains in the coming months due to the basic effects of a severe economic downturn in early 2020.
The faster launch of COVID-19 vaccines in some countries and the planned US stimulus package have helped support a brighter global economic outlook, the Organization for Economic Co-operation and Development said on Tuesday, while raising its growth forecast in 2021.
In foreign exchange markets, the dollar was supported by expectations of a faster US economic recovery.
The euro fell 0.25% to $ 1.1871, not far from the three-and-a-half-month low of $ 1.18355 on Tuesday. The yen changed hands at 108.70 per dollar, after reaching a nine-month low of 109.235 the previous day.
The Australian dollar fell 0.6% at one point to $ 0.7672 after the country’s central banker rejected market talks about early rate hikes.
Oil prices, which have risen by 30% since the beginning of the year, have stabilized in the meantime, while worries about disruption in Saudi Arabia have eased.
Crude futures recovered from an overnight swing to stay at $ 67.45 a barrel, while US crude futures fluctuated at $ 64.18 a barrel after reaching a high of nearly 2 on Monday year and a half for $ 67.98.
Precious metals gold fell 0.1% to $ 1,714.55 an ounce after rising more than 2% on Tuesday.
“There is an element of price corrective action after a very dynamic return of gold,” said Ilya Spivak, DailyFX’s currency strategist.
Reporting by Hideyuki Sano in Tokyo and Matt Scuffham in New York; Editing by Sam Holmes, Richard Pullin and Ana Nicolaci da Costa