Global equities rally as yields decline

NEW YORK (Reuters) – A gauge in global equities was on track for its biggest single-day percentage rise in a week on Tuesday, as lower U.S. Treasury yields eased fears the economic recovery could overheat and lead to higher inflation than expected.

Yields on U.S. Treasuries fell with their eyes on the $ 120 billion 3, 10 and 30-year treasury bill auction this week, as weak 7-year note sales spurred a surge yields two weeks ago was followed by another sluggish auction last week.

The benchmark 10-year notes last rose 10/32 to a yield of 1.5594%, up from 1.594% on Monday night. The rating has crossed 1.6% three times since February 25, reaching levels not seen in more than a year.

On Wall Street, each of the major averages was higher, driven by a gain of more than 3% in the Nasdaq, putting the high-tech index on track for its biggest one-day percentage rise in just over four months. The index has been very sensitive to the rate hike, and Monday’s pullback left it down more than 10% from its Feb. 12 close, confirming what is widely seen as a correction.

“It’s the tail that wags the dog; it’s interesting that attention has really shifted to the impact of extremely aggressive tax spending on the likelihood that inflationary pressures will once again become a mainstay of the investment landscape, ”said Peter Kenny, Founder of Kenny’s Commentary LLC and Strategic Board Solutions LLC in Denver.

“It’s an expected response, highly predictable and, dare I say it, welcome, and it all depends on speed.”

The Dow Jones Industrial Average rose 263.57 points, or 0.83%, to 32,066.01, the S&P 500 gained 66.58 points, or 1.74%, to 3,887.93 and the Nasdaq Composite added 394.01 points, or 3.12%, to 13,003.18.

In Europe, lower yields helped stocks ignore data showing a larger-than-expected drop in euro area economic output in the fourth quarter, although the gains were less pronounced than in the United States after European stocks jumped more than 2% on Tuesday.

Investors will also be closely following a European Central Bank meeting later this week to see if policymakers have moved to step up the pace of emergency bond purchases to appease nervous markets.

Data on Tuesday showed the ECB barely increased its emergency bond purchases last week even before subtracting debt that matured during that time, raising new questions about banks’ resolve power plants to slow down the liquidation of the bond market.

The pan-European STOXX 600 index rose 0.72% and the gauge of MSCI stocks around the world gained 1.48%.

The faster rollout of COVID-19 vaccines in some countries and the planned US $ 1.9 trillion stimulus package have helped improve the global economic outlook, the Organization for Economic Co-operation and Development said ( OECD), raising its growth forecast for 2021 to 5.6. %.

Germany’s 10-year government bond yield last rose 6/32 to a yield of -0.298%, from -0.278% on Monday, moving further away from the nearly one-year high of – 0.203% at the end of February.

In forex markets, the dollar index moved away from a 3-1 / 2 month high, allowing riskier currencies such as the Aussie and the Kiwi dollar to rally.

The dollar index fell 0.312%, with the euro up 0.34% to $ 1.1883.

Oil prices retreated from previous volatile trade highs as Brent retreated to the $ 68 mark as investors weighed in on fears of a supply disruption in Saudi Arabia with the likelihood of a limited supply at based on OPEC + production limits.

US crude recently fell 0.57% to $ 64.68 a barrel and Brent was at $ 68.12, down 0.18% on the day.