NEW YORK, Oct 6 ― Global equity markets rallied yesterday as US and European tech stocks rebounded and the dollar strengthened ahead of US payrolls data on Friday that could reveal the Federal Reserve's next move on tapering its support to the economy.
Most major US and European stock indices rose more than 1 per cent, while yields on the 10-year US Treasury note, a touchstone for investor sentiment, edged above 1.5 per cent. Another jump in crude oil futures fuelled inflation fears.
Investors are focused on Friday, when the US unemployment report for September may determine when the Fed proceeds with plans to begin tapering US$120 billion (RM501 billion) a month of bond purchases.
Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia, said the day's rally in stocks was nothing more than a rebound after a weak stretch. The S&P 500 slid less than 4 per cent peak-to-trough from late September, and is up almost 16 per cent year to date.
Friday's report “will be telling about the direction of both interest rates and the economy, and by definition the equity markets as well,” Tuz said.
Non-farm payrolls data is expected to show continued improvement in the labour market, with a forecast for 488,000 jobs to have been added last month, a Reuters poll showed.
MSCI's all-country world index, a US-centric gauge of stock performance in 50 countries, closed up 0.69 per cent after trading above 1 per cent earlier in the session.
European stocks closed up 1.17 per cent as rising bank shares and encouraging results from chipmaker Infineon calmed nerves following a tech-fuelled sell-off on Wall Street on Monday.
The European tech sector jumped 2.2 per cent, breaking a seven-session losing streak in which it fell 11.7 per cent. European bank stocks rose 3.5 per cent to more than a 1-1/2 year high.
On Wall Street, the Dow Jones Industrial Average rose 0.92 per cent, the S&P 500 gained 1.05 per cent and the Nasdaq Composite added 1.25 per cent.
Inflation expectations jumped with the US breakeven rate on five-year Treasury Inflation-Protected Securities (TIPS) rising to 2.61 per cent, the highest level since late July.
The 10-year Treasury note rose 5.5 basis points to yield 1.5362 per cent. Germany's 10-year bund yield, the benchmark for the region, rose 3.5 bps to -0.183 per cent, or 30 basis points higher than it was two months ago.
In Europe, a market-based gauge of long-term euro zone inflation expectations surged to a new six-year high as rising crude and record gas prices fanned inflation fears.
The five-year euro forward swap hit 1.8369 per cent, the highest since July 2015. It was 1.26 per cent at the start of 2021.
Short-dated yields have jumped as the US Treasury eyes October 18 as when it could run out of cash. Democrats planned a Wednesday vote in the Senate to suspend the US debt ceiling, setting up yet another confrontation with Republicans that risks an economically crippling federal credit default.
The dollar index, which tracks the greenback versus a basket of six currencies, rose 0.16 per cent to 93.997.
The euro slid 0.24 per cent at US$1.1593, while the Japanese yen traded up 0.58 per cent at US$111.5100.
Brent crude futures rose to a three-year high while US benchmark oil hit its highest since 2014 after the Organization of the Petroleum Exporting Countries and allies stuck to their planned output increase rather than pumping even more crude.
Brent crude rose US$1.30 to settle at US$82.56 a barrel. US crude settled up US$1.31 to US$78.93 a barrel.
Gold prices fell as firmer US Treasury yields and a stronger dollar dented the safe-haven metal's appeal. US gold futures settled down 0.4 per cent at US$1,760.90 an ounce.
Market focus in Asia was on whether embattled property developer China Evergrande would offer any respite to investors looking for signs of asset disposals.
Trading in shares in the world's largest indebted developer was halted on Monday but other Chinese property developers grappled with ratings downgrades on worries about their ability to repay debt.
Bitcoin rose above the US$50,000 mark for the first time in four weeks, adding to a series of gains since the start of October. It was last up 4.5 per cent on the day. ― Reuters
