Stocks rise after tech savage reboot, returns are slightly higher

LONDON (Reuters) – Global stock markets edged higher on Wednesday after an astonishing rebound in US tech stocks, while dollar and benchmark government yields both rose ahead of a key US Treasury auction and a reading of inflation later.

But the gains were moderate after the dean Tesla electric car’s 20% surge on Tuesday, the 4% jump at Nasdaq and the biggest one-day gain for global heavyweights Amazon and Microsoft in more than a year. month.

Asia rebounded from a two-month low as Chinese markets shrugged off recent concerns about central bank tightening and Europe was helped early on by a new all-time high for the German DAX .

Yields on the dollar and bonds also rose. Traders focused on US bond auctions and inflation data later, 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 moves in US big tech underscored just how volatile markets, which are increasingly dominated by oversized passive funds, are likely to be this year as the world tries to reset after COVID. -19 pandemic.

“The winds are blowing harder now. The world is not a more dangerous place, a slight increase in interest rates is not a cataclysmic event … but there is now a big herd mentality with a greater propensity for rotations ”, a- he declared.

“They move more frequently, they move faster and they leave a trail of inefficiency,” leaving markets vulnerable to large swings, he added.

The overnight gains in Asian stocks came after Chinese stocks fell to their lowest levels since mid-December the day before on the prospect of political tightening and a slowing economic recovery.

The announcement that a $ 1.9 trillion U.S. coronavirus relief package was about to be final approved sparked a global surge in bond yields on Monday. This had pushed the Nasdaq more than 10% below its closing February 12 high, confirming a correction in the index.

The yield on the benchmark 10-year notes was 1.540%, after peaking at 1.626% on Friday, after the auction of US $ 58 billion of 3-year notes was well received.

Still, many investors in the market have remained on the lookout, with the next investor appetite tests for government debt due later this week in the form of 10 and 30-year auctions.

“Although the bond market has stabilized a bit, the pressures will remain,” said Naokazu Koshimizu, senior rate strategist at Nomura Securities.

“He took into account the future normalization of the Fed’s monetary policy, with the Fed’s policy eventually becoming neutral. But he has yet to factor in the possibility of his policy tightening. “

INFLATION PALPATIONS

Some investors see a real risk of overheating the US economy and rising inflation due to the expected boom in government spending.

US consumer price data, due at 1:30 p.m. GMT, is expected to show a slight acceleration in headline inflation in February, with analysts expecting further gains in the coming months due to the base effects of a severe economic recession in early 2020.

The faster rollout of COVID-19 vaccines in some countries and the planned U.S. stimulus package have helped improve the global economic outlook, the Organization for Economic Co-operation and Development said on Tuesday, upping its growth forecast for 2021.

In currency markets, the dollar was supported by expectations of a faster economic recovery in the United States.

The euro eased by as much 0.25% to $ 1.1871, not far from Tuesday’s three-and-a-half-month low of $ 1.18355. The yen changed hands at 108.70 to the dollar, after hitting a nine-month low of 109.235 set the day before.

The Aussie dollar lost 0.6% at one point to settle at $ 0.7672 also after the country’s main central banker pushed back talks about anticipated rate hikes.

Oil prices, which have jumped 30% since the start of the year, have meanwhile stabilized as concerns over a supply disruption in Saudi Arabia have eased.

Brent futures have recovered from a nightly swing to hit $ 67.45 per barrel while U.S. crude futures have hovered at $ 64.18 per barrel, after peaking for almost 2 1/2 years of $ 67.98 Monday.

Precious metal gold fell 0.1% to $ 1,714.55 an ounce after rising more than 2% on Tuesday.

“There is an element of price corrective action after a very sharp rebound in gold,” said Ilya Spivak, currency strategist at DailyFX.