(Bloomberg) — Sovereign bonds extended a rebound, U.S. and European equity futures rose and the dollar dipped Monday, signaling calmer markets after the turmoil sparked by last week’s slide in government debt.
Treasury benchmark yields fluctuated around 1.40% and Australian and New Zealand debt rallied sharply. Australia’s 10-year yield slid the most in a year after the central bank doubled purchases at its regular bond-buying operation in a fresh bid to pacify fixed-income markets.
The recovery in bonds helped S&P 500 and Nasdaq 100 equity futures advance, while stocks in Japan, Australia and Hong Kong jumped. On Friday, the S&P 500 slipped and tech stocks staged a modest rebound as Treasuries recovered from their sharpest selloff in a year.
Most Group-of-10 currencies climbed, with the Australian and New Zealand dollars among the outperformers despite data showing China’s economic recovery slowed in February. Commodities rose as oil topped $62 a barrel.
“With a lot of the move in yields due to the improving growth outlook and reopening prospects, risk appetite is holding up,” said Esty Dwek, head of global strategy at Natixis Investment Manager Solutions. “The pace and scale of the move in yields is more important than the absolute level, suggesting that as long as the move is gradual, risk assets should be able to absorb them.”
Global bonds have stabilized and equity markets edged higher after central banks from Asia to Europe provided reassurance that policy support remains in place. Investors have become concerned about the prospect of higher inflation leading to tighter policy as the global recovery gathers pace, and traders are ramping up positioning for the Federal Reserve to start raising interest rates as soon as next year.
“The market is testing the Fed and global central banks as to how serious they are here,” Al Lord, Lexerd Capital Management chief executive officer, said on Bloomberg TV. “There are growth expectations and growing inflation concerns, and that’s playing out in the markets.”
Over the weekend, the U.S. House of Representatives passed President Joe Biden’s $1.9 trillion Covid-19 aid package. The bill heads to the Senate, where Biden will need to woo Republican support or avoid losing a single Democratic vote.
There are some key events to watch this week:
Reserve Bank of Australia sets monetary policy Tuesday.U.S. Federal Reserve Beige Book is due Wednesday.OPEC+ meeting on output Thursday.Fed Chair Jerome Powell to discuss the economy at a Wall Street Journal event on Thursday.The February U.S. employment report on Friday will provide an update on the speed and direction of the nation’s labor market recovery.
These are some of the main moves in markets:
Stocks
S&P 500 futures rose 0.7% as of 2:20 p.m. in Tokyo. The S&P 500 Index fell 0.5%.Japan’s Topix index gained 1.7%.Australia’s S&P/ASX 200 index rose 1.7%.Hong Kong’s Hang Seng Index climbed 1.2%.Euro Stoxx 50 contracts jumped 0.9%.
Currencies
The yen traded at 106.56 per dollar.The offshore yuan was at 6.4702 per dollar, up 0.2%.The Bloomberg Dollar Spot Index fell 0.2%.The euro was at $1.2078.The Aussie dollar rose 0.5% to 77.46 U.S. cents.
Bonds
Australia’s 10-year yield fell 25 basis points to 1.66%.The yield on 10-year Treasuries was steady at about 1.40%.
Commodities
West Texas Intermediate crude rose 1.5% to $62.42 a barrel.Gold rose 0.9% to $1,748.82 an ounce.
(An earlier version of this story corrected a mention about metals.)
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