Stocks, Commodities Rally as Treasuries Steady: Markets Wrap

U.S. equity futures and global stocks rallied, while Treasury yields stabilized as confidence returned to markets after last week’s turmoil.

The advance was broad, with stocks tied to economic reopenings and faster growth notching some of the biggest gains. Europe’s Stoxx 600 Index rose the most in three months, led by retail and travel shares. Apple Inc., Tesla Inc. and American Airlines Group Inc. climbed in early U.S. trading. Futures on the small-cap Russell 2000 Index outperformed the Nasdaq 100 Index.

Benchmark Treasury yields added two basis points to 1.43% and the dollar was steady. Australia’s 10-year yield slid the most in a year after the central bank doubled down on bond purchases to pacify fixed-income markets.

 

After a week of intense volatility in bond markets, investors were shaking off concern about the effects of rising borrowing costs and ready to once again buy risk assets.

The big question remains how central banks will react to rising bond yields. While policy makers at the European Central Bank have said they won’t tolerate higher yields if they undermine the economy, the institution will publish its latest bond-buying figures later today. A significant increase in purchases would show they are backing their words with action.

“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.”

Meanwhile, commodities marched higher. Oil futures in New York rose toward $63 a barrel after losing 3.2% on Friday. The OPEC+ alliance is due to meet on Thursday and expected to loosen the taps after prices got off to their best ever start to a year. But it’s unclear how robustly the group will act, with the Saudi Arabian energy minister calling for producers to remain “extremely cautious.”

The MSCI Asia Pacific Index was up 1.5%, the best performance in a month, led by gains in Japan. Bitcoin jumped 5% to trade around $47,000 in a rebound from last week’s steep losses.

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

• Futures on the S&P 500 Index increased 1.1% as of 11:02 a.m. London time.
• The Stoxx Europe 600 Index climbed 1.5%.
• The MSCI Asia Pacific Index gained 1.5%.
• The MSCI Emerging Market Index advanced 1.2%.

Currencies

• The Bloomberg Dollar Spot Index dipped 0.1% to 1,134.70.
• The euro decreased 0.2% to $1.205.
• The British pound advanced 0.2% to $1.3961.
• The Japanese yen weakened 0.1% to 106.70 per dollar.

Bonds

• The yield on 10-year Treasuries advanced three basis points to 1.43%.
• The yield on two-year Treasuries increased less than one basis point to 0.13%.
• Germany’s 10-year yield dipped four basis points to -0.30%.
• Britain’s 10-year yield fell four basis points to 0.782%.

Commodities

• West Texas Intermediate crude gained 1%.
• Gold strengthened 0.7% to $1,745.71 an ounce.

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