Stock markets reassured by Wall Street bounce – Financial Times

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Tuesday 08:15 GMT

What you need to know

  • Dollar comes under pressure as move back into stocks continues
  • European bourses only make modest gains after a stronger showing in Asia
  • Wall Street rebounds with its biggest two-session rise in 2 years
  • US 10-year Treasury yield slips back from 2.85% as investors buy back into it
  • Oil higher on Opec demand outlook
  • Currencies steady despite White House debt plan

Leading quote

“There are tentative signs of the risk trade creeping back into markets again, so the demand to hold the dollar is waning,” says Stephen Gallo at Bank of Montreal.

“The next leg of the move, which will see accelerated dollar weakness, will occur when commodity prices start to bounce. But I think we need to get through tomorrow’s US inflation data first before that can happen in a meaningful way.”

Hot topic

The dollar is falling across the board as the recent bout of turmoil on global stock markets eases, as investors continue to edge back into stocks.

Currencies markets sat out much of last week’s sudden bout of volatility that shattered the established sense of calm on world markets which was stoked by fears of the implications of a return to inflation and raising fears of the demise of the bull market in stocks.

Amid a feeling that FX traders were refining their reaction, the dollar index slipped 0.3 per cent overall, with the euro up 0.2 per cent at $1.2314. The yen strengthened notably, by 0.9 per cent to ¥107.68 per dollar, a level it last touched briefly in September and regularly held in November 2016.

European equities are making a steady start after a stronger rebound for their Asian peers and Wall Street’s biggest two-session rise in just over two years.

The FTSE 100 is up 0.2 per cent, with the Europe-wide Stoxx 600 up 0.1 per cent and a flat start for the Xetra Dax 30 in Frankfurt.

The 10-year US Treasury yield is down 2.2 basis point at 2.833 per cent, having pulled back slightly from a fresh four-year high of 2.89 per cent in US trading. Consumer price index data for January, due out on Wednesday, is expected to play into the outlook for inflation in the US amid a wider trend for investors to sell the debt, which has taken its yield up sharply from the 2.43 per cent at which it started the year.

The Hang Seng index was up 2.2 per cent in Hong Kong, having shed 9.5 per cent last week. Technology stocks saw the biggest gain, adding 2.7 per cent, with all market segments higher. The index is now up 0.6 per cent for the year though remains off 8.5 per cent for February.

Tokyo’s Topix, returning from a market holiday on Monday, was up 0.1 per cent, falling from earlier gains, and remains down 4.7 per cent for 2018 after last week’s global equities sell-off.

In mainland China, the CSI 300, tracking Shanghai and Shenzhen-listed stocks, rose 2.1 per cent.

Sydney’s S&P/ASX 200 was 0.6 per cent higher, buoyed by an improved performance from the resources sector.

The moves came after the benchmark S&P 500 gained 1.4 per cent on Wall Street as energy and technology stocks helped the index recover more of last week’s losses.

Commodities

Oil prices were higher after Opec signalled it expects demand for crude this year to exceed current levels despite rising US output.

Brent oil, the international benchmark, was up 0.6 per cent at $62.98 a barrel. West Texas Intermediate, the US marker, was 0.6 per cent higher at $59.63 a barrel.

Gold rose 0.2 per cent to $1,325 an ounce and bitcoin was trading around $8,600.

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