Stocks, futures surge as bonds fall; dollar drops

Bloomberg

Stocks in Europe rise on Tuesday along with US equity futures as risk appetite returned to markets roiled by concerns about global economic growth, surging prices and policy tightening. Treasury yields rise and the dollar retreated.
Industrial and basic-resources stocks led a broad-based advance of the Stoxx Europe 600, setting the gauge on course for a third day of gains. The technology sector outperformed following a rally in Chinese tech stocks on optimism Beijing may ease up on a yearlong clampdown. Contracts on the S&P 500 bounced back after a Wall Street drop, while futures on the tech-heavy Nasdaq 100 jumped more than 2%.
Bond yields across Europe jumped, with the 10-year UK rate surging as much as 10 basis points as traders added tightening bets after data showed employers added 121,000 jobs last month, more than double the forecast.
A challenging global economic outlook amid elevated food and fuel costs and tightening monetary settings continues to shape sentiment, although one bond-market measure — the five-year breakeven rate — is signalling inflation may have peaked. Oil has jumped to about $114 a barrel and an index of agricultural prices is at a record high.
“All-in-all, the price action is suggestive of a market that can’t decide what it wants to do,” said Jeffrey Halley, a market analyst at Oanda. “Concerns around recessions make me feel that a decent correction lower from the dollar and US yields is increasingly likely. I’m still not sure it provides markets with a reason to turn long once again on equities.”
An Asian share index rose for a third day — its longest winning streak since mid-March — amid a jump in some technology firms and as investors assessed China’s efforts to stamp out Covid-19. A meeting between the nation’s top regulators and corporate giants raised hopes the battered tech sector is near a turning point.
Meanwhile, Shanghai reported three days of zero community transmission, a milestone that could lead officials to start unwinding a punishing lockdown. Flareups elsewhere in China showed how hard it is to tackle the Omicron strain.
Cryptocurrencies weathered the latest stablecoin turbulence, with Bitcoin rising above the $30,000 mark.
US data showed New York state manufacturing activity unexpectedly shrank in May for the second time in three months. That followed Chinese figures revealing a collapse
in economic activity due to Covid-linked curbs.
The economic reports have fanned concerns of a downturn in the global economy alongside persistent price pressures that are forcing the Federal Reserve and a slew of other central banks to tighten monetary policy.
“With inflation showing little sign of letting up, the Fed is under pressure to accelerate the pace of tightening,” Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, said in a note. Taken together with the impact of Russia’s war in Ukraine and China’s Covid-19 struggles, this backdrop “suggests global growth may be decelerating more quickly than forecast,” she said.
New York Fed President John Williams downplayed deteriorating liquidity conditions in financial markets, saying it was to be expected as investors grapple with uncertainty over global events and shifting US monetary policy.
The Stoxx Europe 600 rises 1.5% as of 9:54 am London time and futures on the S&P 500 also climb 1.5%.
While futures on the Nasdaq 100 rise 2.2%, futures on the Dow Jones Industrial Average also surged 1.1%. The MSCI Asia Pacific Index climbs 1.5% and the MSCI Emerging Markets Index also rises 2%.
The Bloomberg Dollar Spot Index falls 0.4% and the euro rises 0.5% to $1.0489.
While the Japanese yen falls 0.2% to 129.39 per dollar, the offshore yuan rises 0.6% to 6.7570 per dollar and the British pound rises 1.2% to $1.2468.