May 6, 2021

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Global stocks rise as bond markets stabilize after sell off

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Stocks in Asia rose as global bond markets stabilized after violent swings last week, as oil prices climbed and the British pound rallied to optimism about the British economic recovery .

Japan’s Topix index rose 2% on Monday afternoon, while the Australian benchmark S & P / ASX 200 climbed 1.7%. China’s CSI 300 index of stocks listed in Shanghai and Shenzhen and Hong Kong’s Hang Seng each added 1.3%.

In sovereign bond markets, the yield on Australian 10-year government bonds fell 0.25 percentage points to 1.651%, while that of New Zealand bonds of the same maturity fell 0.17 percentage points to 1.722%. Yields fall as bond prices rise.

Gains in Asia-Pacific equities and bond prices followed a rebound of US government debt at the end of last week. The 10-year US Treasury yield was unchanged at 1.403 percent in Asia on Monday after falling 0.11 percentage point on Friday from a 12-month high in the previous session.

Futures markets showed gains for US stocks when Wall Street opened on Monday, with the S&P 500 expected to rise 0.7% after falling 0.5% on Friday. The FTSE 100 was expected to increase by 0.9%.

Volatility in global debt and equity markets has been fueled by growing concerns among investors that a broad economic recovery from the pandemic could spur inflation, prompting central banks to withdraw their unprecedented support for monetary policy.

“Global real returns could rise further,” said Robert Buckland, chief global equity strategist at Citigroup. “This is bad for the stock markets, especially those that are geared towards high-rated growth stocks.”

He said this was especially the case in the United States, where valuations of large tech companies have been supported by low rates.

While low rates increase the present value of future cash flows of technology groups, the present value of future profits decreases as rates rise.

Inflation expectations rose further over the weekend when the US House of Representatives past President Joe Biden’s $ 1.9 billion coronavirus stimulus package, months after previous support measures expired.

These expectations have also spilled over into commodity markets, including oil prices. Brent, the international benchmark, added 1.6 percent to $ 65.42 a barrel while West Texas Intermediate, the US marker, rose by the same amount to $ 62.47.

In foreign currencies, the British pound rose 0.4 percent against the US dollar to $ 1.3991. The UK government has signaled that the country’s economic recovery, supported by the rollout of the vaccine in recent months, would help avoid larger tax hikes by further closing the government revenue gap produced by the pandemic.



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