US equities are rising as a bond rally

Shares, especially shares of technology companies, have been affected by volatile movements in government bond markets in recent trading sessions. A fall in yields last week called into question the prospect of a long period of low interest rates, which supported the rising rallies of stocks over the past year.

The drop in yields on Monday helped revive investor demand for shares. But money managers remained cautious about further increases that could trigger new stock price volatility. Investors will later look into a speech by Fed Governor Lael Brainard as to whether the central bank will push back against higher yields.

“This week is key,” said Andrea Carzana, a fund manager for Columbia Threadneedle Investments in London. If the Fed does not try to lower higher inflation expectations, yields could continue to rise, shaking the stock market, according to Mr Carzana.

“I expect turbulence or volatility to stay with us until we better understand where the central banks are,” he said.

Fed officials have so far suggested that rising yields reflect expectations for an economic recovery fueled by the vaccination program and the likelihood of an additional fiscal stimulus. Over the weekend, President Biden called on the Senate to take swift action after the House passed its $ 1.9 trillion aid package to Covid-19.

Democrats are struggling to complete the package before March 14, when certain types of federal unemployment assistance expire.

The rate at which yields have risen, rather than their direct level, has bothered many investors. “I still think stocks are more attractive than bonds, especially if you think there will be some temporary inflation,” Mr Carzana said, adding that stocks offer more protection against rising prices.

Ms Brainard is due to address a conference of the Institute of International Banking on Financial Stability at 9:05 ET. New York Fed John Williams, Cleveland Fed Loretta Mester and Minneapolis Fed Neel Kashkari are also scheduled to make public appearances.

The reading of the manufacturing index of the Institute for Supply Management in February will end at 10 am and is expected to present another month of robust growth in activity in US factories.

The corporate earnings season ends with Zoom Video Communications and Novavax scheduled to report quarterly results after markets close.

Oil markets resumed their rally ahead of a meeting of the Organization of the Petroleum Exporting Countries and its partners on Thursday. Brent crude futures, a benchmark in international energy markets, rose 1.7% to $ 65.52 a barrel, extending their lead this year to 27%.

Analysts expect the cartel, which held millions of barrels of crude oil a day last spring to support prices, to agree to boost production in April.

Improving investor sentiment has stimulated overseas markets. Stoxx Europe 600 increased by 1.7%, driven above by the shares of retail and tourism companies, whose fortunes depend on the reopening of economic activity.

In Asia, Japan’s Nikkei 225 rose 2.4% at the close, and China’s Shanghai Composite Index added 1.2%.

China’s production activity relaxed in February, recording the slowest rate of expansion in nine months, according to a private survey of producers. However, it was the 10th consecutive month in which the Caixin index remained above 50, which separates the contraction expansion.

Write to Joe Wallace at [email protected]