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NEW YORK, Feb 24 ― A gauge of global equity markets rebounded in a late-session rally yesterday after US Federal Reserve Chair Jerome Powell calmed fears of rising interest rates that have roiled bonds and helped spur assets linked to expectations of a strong recovery.
Copper, a leading indicator of the economic cycle, touched a 9-1/2 year high before paring early gains, while crude settled near break-even. But oil edged up as the Dow and S&P 500 rose into the black and Tesla recouped most steep losses.
Investors have learned to buy the dip when equities drop as little as 3 per cent to 4 per cent, especially as they've been rewarded for doing so the past six months and for a decade, said Dennis Dick, a proprietary trader at Bright Trading LLC.
“It's so hard to get on the bear train,” Dick said. “Just when it starts to get a little ugly, there's so much reward in buying the dip.”
Powell told a US Senate Banking Committee hearing that the recovery remains “uneven and far from complete,” and that it will be “some time” before the Fed considers changing policies aimed at achieving full employment.
Powell believes monetary policy needs to be supportive and that there is a long way to go to repair the jobs market and before inflation becomes a concern, said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.
“I'm not anticipating any changes to monetary policy any time soon,” Arone said, a view that should ease market concerns that the Fed could boost rates to tap down inflation.
MSCI's benchmark for global equity markets closed up 0.04 per cent at 674.03, while the Dow Jones Industrial Average eked out a gain of 0.05 per cent and the S&P 500 rose 0.13 per cent.
Tech stocks fell as investors sold recent winners to rotate into assets that are expected to do well in an improving economy. The tech-heavy Nasdaq dropped 0.5 per cent while in Europe tech stocks posted their worst two-day decline in four months, falling 3.7 per cent.
The broad FTSEurofirst 300 index closed down 0.46 per cent to 1,583.81, but rising borrowing rates lifted bank stocks, with Spain's bank-heavy index adding 1.7 per cent.
Gold slid as the dollar rebounded from six-week lows, with other precious metals also sliding. A 15.2 per cent jump at one point showed the degree of market angst as reflected in Cboe's market volatility index, which shed gains to fall 1.4 per cent.
Tesla shares fell into the red for the year, hit by an 11.4 per cent plunge in bitcoin. Tesla closed down 2.2 per cent at US$698.84 (RM2,825.64).
The electric carmaker recently invested US$1.5 billion in the cryptocurrency, which fell as investors grew nervous of its sky-high valuations.
After being knocked off an eight-month high by European Central Bank chief Christine Lagarde signaling discomfort with the recent surge in yields, the 10-year Bund yield resumed a recent upward trajectory and was last at -0.314 per cent.
US yields retreated slightly after Powell's comments.
Yields had jumped to 1.394 per cent on Monday, up from less than 1 per cent at the start of the year, on fears the Fed would crack down on inflationary pressures by boosting borrowing costs. The 10-year US Treasury note fell 1.7 basis points to 1.3517 per cent.
Oil prices jumped by more than US$1 at one point, underpinned by optimism over Covid-19 vaccine rollouts and lower output as US supplies were slow to return after a deep freeze in Texas shut in crude production last week.
Brent crude futures rose 13 cents to settle at US$65.37 a barrel, while US crude futures fell 3 cents to settle at US$61.67 a barrel. Brent and US crude rose in after-hours trade.
In currency markets, the dollar in early trade briefly dropped to its lowest since January 13, while commodity-linked currencies hovered near multi-year highs.
The dollar index rose 0.128 per cent, with the euro down 0.1 per cent to US$1.2142. The Japanese yen weakened 0.20 per cent versus the greenback at 105.25 per dollar.
US gold futures settled down 0.1 per cent at US$1,805.90 an ounce. ― Reuters