LONDON / SYDNEY (Reuters) – Global equities stabilized Tuesday, supported by stronger US stock futures and a decline in US and European bond yields.
In Europe, the Euro STOXX 600 rose 0.1% after a rise on Monday that took the German index to a record high.
During volatile trading in Asia, the Shanghai Composite index fell 1.8% and came close to a correction from a multi-year high on Feb. 18 amid fears of policy tightening. Japan’s Nikkei ended 1% higher as consumer goods companies and developers won expectations that they would benefit from an economic recovery.
“We are going through a consolidation phase,” said Francois Savary, Chief Investment Officer at Prime Partners. “There is a trend towards a rotation in the market, which is correct because the price-earnings ratios have been excessively high. But overall, we think we’ll have a more balanced stock market than 2020, although the volatility won’t forget us. “
NASDAQ futures were up 1.6% and S&P 500 futures were up 0.8%.
US Treasury Secretary Janet Yellen said on Monday that President Joe Biden’s aid package for coronavirus would provide enough resources to fuel a “very strong” economic recovery in the US, noting that “there are tools” to cope with inflation.
Still, investors remain in conflict over whether the stimulus will help global growth recover faster from the downturn of COVID-19 or cause the world’s largest economy to overheat and fuel inflation.
“The likelihood of seeing more inflation in the economy is greatly increased by the monetary and fiscal policies that we see around the world,” Goldman Sachs Chief Executive Officer David Solomon told a webcast at a conference in Sydney.
“There is certainly a reasonable result where inflation is accelerating faster than people expect, and that will clearly have an impact on the markets and volatility.”
The technology sector and other richly valued companies are very sensitive to the rising rates.
Australian stocks tracked gains on Wall Street overnight, with the main S & P / ASX 200 index up 0.5% on Tuesday. However, Australian technology stocks fell for the sixth consecutive session, in line with their US counterparts.
Likewise, South Korea’s KOSPI fell 0.7%, down for a fourth consecutive session, as tech stocks were sold.
US economic data pointed to a continued recovery. Wholesale inventories surged in January despite a surge in sales, the Commerce Department said on Monday, suggesting inventory investments could once again contribute to growth in the first quarter.
“If interest rates get higher because people get bullish about what economic growth looks like, it’s still good for stock prices,” said Tom Hainlin, global investment strategist at US Bank Wealth Management’s Ascent Private Wealth Group in Minneapolis.
Long-term eurozone government bond yields fell before the release at 1000 GMT of final gross domestic data for the block. A Reuters survey predicts that the region’s economy has contracted by 5% from a year earlier.
Germany’s 10-year government bond yield fell by two basis points to -0.298%.
The yield on US 10-year government bonds also fell to 1.5472%. Government bond yields have risen in recent months as investors praise higher inflation and a more positive outlook for the US economy.
In the currency markets, the dollar index fell back from its three and a half month high. In signs that risk appetite is returning, the pound sterling, Aussie and Kiwi dollar have all moved up slightly. The euro rose 0.1% to $ 1,185.
Oil prices fell on Tuesday amid diminishing fears of a supply disruption to Saudi Arabia following an attack on export facilities.
Brent crude oil futures for May fell 0.7% to $ 67.78 a barrel. American West Texas Intermediate (WTI) oil for April fell 0.8% to $ 65.53.
Spot gold added 0.7% to $ 1,692.21 an ounce.
Additional reporting by Matt Scuffham in New York; edited by Christian Schmollinger, Jacqueline Wong, Larry King