LONDON (Reuters) – World stock markets rose higher on Wednesday after a staggering recharge in U.S. technology stocks, while government dollar and benchmark yields both rose ahead of a major U.S. Treasury auction and inflation later.
However, gains were dampened after Tuesday’s 20% increase in electric car doyen Tesla, 4% in the Nasdaq and the biggest one-day gain for global heavyweights Amazon and Microsoft in more than a month.
Asia bounced back from a two-month low as China’s markets weakened their recent central banking policies and intensified concerns, helping Europe early on by a new everyday high for the German DAX.
Dollar and bond yields also rose. Traders were later focused on the US bond auction and inflation data, as well as Thursday’s European Central Bank meeting where it is expected to respond to the recent rise in borrowing costs.
Mikhail Zverev, head of global equities at Aviva Investors, said Tuesday’s wild movements in major US technology underscore how volatile markets, increasingly dominated by super-large passive funds, are likely to be this year as the world tries to recover from the COVID -19 pandemic.
“The wind is blowing harder now. “The world is not a more dangerous place, a moderate increase in interest rates is not a catastrophic event … but there is now the large herd mentality with a greater tendency towards rotations,” he said.
“They move more frequently, they move faster and leave a trail of inefficiency, leaving markets vulnerable to big swings,” he added.
The gains in Asian equities came overnight after Chinese equities fell to their lowest level since the previous day, with the prospect of tighter policies and a slow economic recovery.
The news that a $ 1.9 billion US coronavirus relief package was nearing final approval on Monday sparked a global rise in the rate of return. This pushed the Nasdaq more than 10% below its February 12 closing point, confirming a correction for the index.
Yields on standard 10-year notes were at 1,540%, peaking at 1,626% on Friday, after Tuesday’s $ 58 billion auction in US 3-year notes was well received.
Still, many market investors have been on the verge, with the following tests for investors’ appetite for government debt set to take place later this week in the form of ten- and thirty-year auctions.
“Although the bond market has risen slightly, the pressure will continue,” said Naokazu Koshimizu, senior rate strategist at Nomura Securities.
“It praised the Fed’s monetary policy in the future, and the Fed’s policy will eventually become neutral. But it has not yet praised the chances of its policies being tightened. ”
INFLATION PALLETS
Some investors see a real risk of an overheated US economy and higher inflation due to the planned boom in government.
US consumer price data at 1330 GMT is expected to show a slight acceleration of overall inflation in February, with analysts expecting further gains in the coming months due to the basic effects of a severe economic downturn in early 2020.
The faster deployment of COVID-19 vaccines in some countries and the planned U.S. stimulus package have helped support a better global economic outlook, the Organization for Economic Co-operation and Development said Tuesday as it increased its 2021 growth forecast.
In foreign exchange markets, the dollar is supported by expectations of a faster economic recovery in the US.
The euro fell as much as 0.25% to $ 1.1871, not far from Tuesday’s 3 1/2 month low of $ 1.18355. The yen changed hands at $ 108.70 per dollar after reaching a negative month of 109,235 the previous day.
The Australian dollar also shook 0.6% to $ 0.7672 at some point after the country’s leading central banker repelled market convenience over early rate hikes.
Oil prices, which have risen by 30% since the beginning of the year, have meanwhile risen as concerns over supply disruption in Saudi Arabia have eased.
Brent crude futures recovered from an overnight sling to sit at $ 67.45 a barrel, while U.S. crude futures hovered at $ 64.18 a barrel after hitting a 2 1/2 high on Monday year of $ 67.98.
Precious metal gold fell 0.1% to $ 1,714.55 per ounce after rising more than 2% on Tuesday.
“There is an element of affirmative action after a very exciting goldback,” said DailyFX currency strategist Ilya Spivak.
Reporting by Hideyuki Sano in Tokyo and Matt Scuffham in New York; Edited by Sam Holmes, Richard Pullin and Ana Nicolaci da Costa