European stocks followed Asian stocks higher on Tuesday, while government bonds came under pressure as traders returned to riskier assets after the worst string of weekly losses for global equities since 2008.
The regional Stoxx Europe 600 index gained 0.7% after ending the previous session flat, while London’s FTSE 100 extended its gains on Monday to rise 0.2% in early trades.
The moves came as Hong Kong’s Hang Seng rose 2.9%, with a tech-focused sub-index up more than 5% as the heads of major Chinese tech firms met with regulators to discuss the state of the country’s digital economy.
The dollar index, a measure of currency against six others, slipped 0.2%. Currency markets are “calming down a bit after a tumultuous month”, ING analysts said, after a period of declines in global equities and the U.S. currency hitting multi-year highs. It “looks like we’re entering a period of consolidation,” ING said.
The economic malaise has centered on China, they added, where lockdowns have fueled fears about global growth prospects.
Beijing’s lockdown strategy “seems unlikely to change anytime soon,” ING said, “but there is very short-term optimism that residents and workers in Shanghai could be released after three days of no new cases of Covid”.
Futures following Wall Street’s S&P 500 added 0.5% at the start of European trading after the gauge closed a choppy session down 0.4%. Contracts that track the tech-heavy Nasdaq 100 rose 0.7%, following a 1.2% decline for the broader Nasdaq Composite Index due to weakness in major tech and consumer stocks, including Amazon and Tesla.
As stock markets rose, euro zone debt was hit by a fresh wave of selling on Tuesday, pushing yields higher. The yield on the 10-year German Bund, seen as a proxy for borrowing costs across the bloc, rose 0.08 percentage points to 1.01%. The benchmark debt instrument had started 2022 in negative territory. The yield on equivalent Italian government bonds rose 0.08 percentage points to 2.92%.
US debt was also under pressure, with the yield on the 10-year Treasury adding 0.04 percentage points to 2.92% and the policy-sensitive two-year yield rising 0.05 percentage points to 2. .62%.
The Federal Reserve raised interest rates by 0.5 percentage points this month, with increases of a similar size expected at the next three central bank meetings as it moves aggressively to rein in inflation. stubbornly high.
The withdrawal of Fed stimulus dampened the appeal of US sovereign bonds, while anticipation of higher borrowing costs hit high-growth speculative stocks whose valuations had been flattered by interest rates. ultra-low interest during the coronavirus pandemic.
In commodities, Brent fell 0.1% to just over $114 a barrel. The international oil benchmark remains higher by 4% for the month and nearly 50% for the year, as traders weigh the prospect of a global economic slowdown hitting demand, with concerns over supplies following the invasion of Ukraine by Russia.