LONDON / SYDNEY (Reuters) – Global equities stabilized on 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 gains on Monday, which raised Germany’s index to a record high.
In the volatile market in Asia, the Shanghai Composite fell 1.8% and came close to a correction of a multi-year high on February 18 amid fears of tightening policy. Japan’s Nikkei ended 1% higher, as consumer goods companies and real estate developers gained expectations that they would benefit from an economic recovery.
“We are going through a consolidation phase,” said François Savary, investment director at Prime Partners. “There is a tendency for the market to rotate, which is correct, since the price / profit ratio was excessive. But, in general, we believe that we will have a more balanced stock market than 2020, although volatility remains with us. “
NASDAQ futures rose 1.6% and S&P 500 futures 0.8%.
U.S. Treasury Secretary Janet Yellen said on Monday that President Joe Biden’s coronavirus aid package would provide sufficient resources to fuel a “very strong” economic recovery in the US, and noted that “there are tools” to deal with with inflation.
Still, investors remain in conflict as to whether the stimulus will help global growth recover faster from the slowdown in COVID-19 or cause the world’s largest economy to overheat and fuel inflation.
“The chance of seeing more inflation in the economy is significantly increased by the actions of monetary and fiscal policy that we are seeing around the world,” said Goldman Sachs CEO David Solomon at a Sydney conference via webcast.
“There is certainly a reasonable outcome in which inflation accelerates faster than people expect, and that will obviously have an impact on markets and volatility.”
The technology sector and other high-value companies have been highly susceptible to higher rates.
Australian stocks followed overnight gains on Wall Street, with the main S & P / ASX 200 index rising 0.5% on Tuesday. However, Australian technology stocks fell for the sixth consecutive session, in line with their US peers.
Likewise, South Korea’s KOSPI fell 0.7%, falling for the fourth consecutive session, with the liquidation of technology stocks.
US economic data pointed to a continued recovery. Wholesale inventories increased in January, despite increased sales, the Commerce Department said on Monday, suggesting that investment in inventory could again contribute to growth in the first quarter.
“If rates are going up because people are becoming optimistic about what economic growth is like, this is still favorable for stock prices,” said Tom Hainlin, global investment strategist at Ascent Private Wealth Group at US Bank Wealth Management in Minneapolis .
Yields on eurozone long-term government bonds fell before the bloc’s final gross domestic data was released at 1000 GMT. A Reuters poll predicted that the region’s economy contracted 5% over the previous year.
Yield on 10-year German government bonds fell two basis points, to -0.298%.
Yields on 10-year US Treasury bonds also declined, to 1.5472%. Treasury yields have been advancing in recent months, as investors assess higher inflation and more optimistic outlook for the US economy.
In foreign exchange markets, the dollar index fell from a three and a half month high. In signs, risk appetite is returning, the pound sterling, the Australian dollar and the kiwi rose. The euro rose 0.1% to $ 1,185.
Oil prices fell on Tuesday, as fears of a disruption to supply in Saudi Arabia eased after an attack on its export facilities.
Brent crude futures for May fell 0.7% to $ 67.78 a barrel. US West Texas Intermediate (WTI) crude in 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; edition of Christian Schmollinger, Jacqueline Wong, Larry King