US stocks rallied on Tuesday as traders hunted for bargains following a sharp weekly decline in global equities as central banks raised interest rates.
Wall Street’s S&P 500, which is down more than a fifth from its January peak, is up 2.1% as trading resumes post-holiday Monday. The tech-focused Nasdaq Composite rose 2.6%.
Shares of US energy companies rose, after a sharp sell-off last week despite sanctions on Russian crude oil push up global oil prices.
In Europe, the Stoxx 600 in the region gained 0.4%, extending gains from the previous session but remaining about 16% lower on the year to date.
“The market is horrible,” said Patrick Spencer, vice president of equities at RW Baird. [that you] tends to decline in the later period”.
The FTSE All-World Index of developed and emerging markets fell the most since March 2020 last week, with a drop of 5.7% – the tenth decline in 11 weeks. The S&P fell 5.8% last week.
That came after the US Federal Reserve raised its key interest rate by 0.75 percentage points, in the first such move since 1994. Fed Governor Christopher Waller later expressed support. household for another 0.75 percentage point increase in July, describing the central bank as “all about re-establishing price stability” after US inflation hit a 40-year high in May.
“We are long overdue for a bear market rally, as a drop in ten out of eleven weeks is a bit extreme,” said Hani Redha, multi-asset portfolio manager at PineBridge Investments. .
“It doesn’t really change the picture of slowing growth and fiscal tightening,” he added.
In the government debt market, the yield on the benchmark 10-year Treasury note, which underpins the pricing of loans worldwide, added 0.06 percentage points to 3.3%. Yields on the policy-sensitive two-year Treasury note rose 0.05 percentage points to 3.21%. Bond yields increase as their prices fall.
The Bank of England and the Swiss National Bank also raised interest rates last week, while the European Central Bank positioned markets to rise for the first time in more than a decade in July.
The Japanese yen touched a 24-year low of 136.33 yen per dollar, as bets by the Bank of Japan fell. will still be reluctant to track other major rating agencies in raising borrowing costs.
Money markets expect the Fed to raise the deposit rate to around 3.6% in December, and the majority of economists surveyed for the Financial Times say the world’s largest economy going into recession next year.
On Monday, Dublin-based building materials group Kingspan sounded the alarm about what it called a deteriorating “mood” across global markets.
On Thursday, surveys of global purchasing managers will provide clues about companies’ order volumes and how they are coping with rising food and fuel costs caused by the invasion. of Russia into Ukraine and the supply chain exacerbated by China’s coronavirus lockdown.
In Asia, the FTSE index of Asian shares outside Japan gained 1.6% while the Topix in Tokyo closed 2.1% higher.
Elsewhere, the euro rose 0.5% to $1.056, after ECB president Christine Lagarde pledged protect weaker eurozone countries from rising borrowing costs.
The price of Brent crude, up 1.4% to $115.77 a barrel, is up nearly 50% since the start of the year.
