(Bloomberg) — U.S. equity futures rose and Treasuries dropped as investors took confidence from the Federal Reserve’s vow to support economic growth.
The reflation trade was back in full swing, with futures on the small-cap Russell 2000 Index beating the Nasdaq 100 in early trading. Tesla Inc. rallied 4% after Ark Investment Management’s Cathie Wood said she bought shares during this week’s selloff. Airlines and cruise operators also advanced.
After a volatile session on Tuesday, U.S. stock markets seemed poised for a recovery following reassuring comments from Federal Reserve Chairman Jerome Powell. In a report to the Senate Banking Committee, Powell called the recent run-up in bond yields that has unsettled the stock market “a statement of confidence” in a robust economic outlook.
“The reflation trades have been given a meaningful push as the Fed is not standing in the way,” said Charles Diebel, head of fixed income at Mediolanum International Fund. “Risk assets can tolerate higher yields as long as the move is gradual and slow.”
The yield on benchmark 10-year Treasuries climbed to 1.36%.
In Europe, the Stoxx 600 pushed higher on bets that the vaccination drive will allow economies to reopen. Travel shares and construction companies were among the top winners. Lloyds Banking Group Plc gained after Britain’s biggest mortgage lender beat estimates and reinstated dividends. The pound strengthened for a fifth day, climbing above $1.41.
Meanwhile, Asian stocks tumbled, led by a retreat in Hong Kong after the city announced its first stamp-duty increase on stock trades since 1993. Mainland-based funds sold a record $2.6 billion worth of Hong Kong stocks through exchange links with Shenzhen and Shanghai. The Hang Seng Index closed down 3%, the biggest retreat in nine months.
Bitcoin climbed back to $50,000. The rebound follows a tough week for the digital currency after skeptical comments from Microsoft Corp. co-founder Bill Gates and Treasury Secretary Janet Yellen.
Some key events to watch this week:
EIA crude oil inventory report is out Wednesday.Finance ministers and central bankers from the Group of 20 will meet virtually Friday. U.S. Treasury Secretary Janet Yellen will be among the attendees.
These are some of the main moves in markets:
Stocks
Futures on the S&P 500 Index increased 0.2% as of 11:01 a.m. London time.The Stoxx Europe 600 Index gained 0.3%.The MSCI Asia Pacific Index fell 1.8%.The MSCI Emerging Market Index fell 1.2%.
Currencies
The Bloomberg Dollar Spot Index declined 0.1% to 1,121.81.The euro increased 0.1% to $1.216.The British pound advanced 0.3% to $1.4152.The Japanese yen weakened 0.5% to 105.80 per dollar.
Bonds
The yield on 10-year Treasuries advanced two basis points to 1.37%.The yield on two-year Treasuries gained less than one basis point to 0.12%.Germany’s 10-year yield dipped less than one basis point to -0.32%.Britain’s 10-year yield climbed three basis points to 0.753%.
Commodities
West Texas Intermediate crude gained 0.5%.Gold strengthened 0.1% to $1,807.10 an ounce.
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