US stocks recovered on Friday after an earlier sell-off, while Treasuries swung in a wide range after figures showing job growth running far ahead of forecast strengthened expectations for a rapid rebound in the world’s biggest economy.
The blue-chip S&P 500 index rose 1.3 per cent in afternoon trading after falling as low as 0.5 per cent earlier in the day.
The technology-focused Nasdaq also rebounded, trading 0.5 per cent higher after sliding 1.5 per cent in the morning.
Friday’s turnround follows a rocky week for tech stocks — the Nasdaq has dropped roughly 10 per cent over the past two weeks in the sharpest pullback since the market ructions following the start of the pandemic last March.
The choppy trading came after Thursday’s losses, which began after Jay Powell, Federal Reserve chairman, provided scant detail on how he would address recent bond market tumult.
Meanwhile, the benchmark 10-year Treasury yield, a vital benchmark for global debt markets, climbed as much as 0.06 percentage points to 1.62 per cent, the highest level in a year. It later receded to 1.56 per cent, leaving the gauge roughly flat on the day.
“We are not looking for rates to shoot dramatically higher from current levels,” said Nancy Vanden Houten at Oxford Economics. “But the risks for interest rates are on the high side.”
The US added 379,000 jobs in February, according to data from the labour department, considerably more than the 200,000 economists polled by Bloomberg predicted. The fresh sign of a strong economic recovery reignited investor jitters that resurgent inflation would hit returns on their bond holdings.
Bond prices have been sliding in the opening weeks of this year, in a move that has accelerated in the past two weeks. Some analysts and investors had expected Powell to use his slot at an event hosted by The Wall Street Journal on Thursday to lend some support to the market, perhaps even signalling a willingness to formally hold yields down.
Instead, while he said the recent pick-up in yields — the flipside of falling prices — was “notable”, and that the US central bank would be “patient” in the face of a temporary rise in inflation, he gave no sense of immediate alarm.
Some analysts expect bond prices to continue falling unless Powell intervenes. “With the Fed, crucially, not yet showing signs of being intimidated by the bond market, the sell-off in rates risks extending,” said Ralf Preusser, global head of rates research at Bank of America.
“It looks like words are not enough,” added Joost van Leenders, senior investment strategist at Kempen Capital Management. “There’s still a lot of unrest with rising yields . . . historically rising yields aren’t bad for equities, the reason why it’s different this time is a lot of equities have high valuations, which are justified by low yields.”
In Europe, the region-wide Stoxx 600 index fell 0.8 per cent, while London’s FTSE 100 benchmark dropped 0.3 per cent and Frankfurt’s Xetra Dax lost 1 per cent.
In Asia, China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks dropped as much as 2 per cent during its session, before closing down 0.3 per cent after Beijing set a target of “above 6 per cent” for economic growth in 2021.
Analysts pointed to the markedly lower growth target relative to recent years.
“This makes me feel uneasy as I don’t know what exactly the government wants to tell us about the recovery path it expects,” said Iris Pang, chief economist for Greater China at ING, who estimated growth would be 7 per cent this year.
Brent crude, the international benchmark, rose more than 2 per cent to $68.63 a barrel, a day after Opec and its allies decided against introducing large increases to their output. “The strong performance in commodities suggests that it is one asset class where investors have moved,” said van Leenders at Kempen.
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2021-03-05 19:21:17Z
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