European equities rallied Monday as US technology stock futures plunged, with bond yields nearing a year high as the world’s largest economy was on the verge of adding $ 1.9 trillion in stimulus.
The US Senate passed its version of the $ 1.9 trillion stimulus package last weekend and returned it to the US House for approval before President Joe Biden can sign it into law. The rise in bond yields – with the 10-year treasury TMUBMUSD10Y,
An increase of 64 basis points in 2021, through Friday, has led investors of assets considered to be undervalued, such as companies in the technology sector, to out-favored sectors with less demanding valuations.
The Stoxx Europe 600 SXXP,
rose 0.6%, with companies struggling during the COVID-19 pandemic leading the way. Cruise operator Carnival CCL,
oil services company TechnipFMC FTI,
tourist conglomerate TUI TUI,
and shopping center operator Klepierre LI,
topped the rankings.
Prepared food kit maker HelloFresh HFG,
and hydrogen fuel company Nel NEL,
both up more than 100% in the past 52 weeks, down sharply.
Futures on the tech-heavy Nasdaq-100 NQ00,
fell 1.6%.
Florent Pochon, a strategist at French bank Natixis, said there are plenty of reasons why markets are jittery, but he expects any equities tantrum will be contained as long as the Federal Reserve remains subdued.
“In terms of valuation, the 10-year-old US appears to be approaching fair value, taking into account all the uncertainty that determines what it is,” he said. “As big as the US fiscal stimulus plan is, it is not expected to generate increased structural inflation, but rather deepen the country’s trade deficit.”
Shares in educational publisher Pearson PSON,
fell a whopping 5% before turning around and rising 5%. The company’s results and outlook were broadly in line with expectations as it outlined plans to sell its international course materials to local publishing houses and to occupy fewer properties.