SINGAPORE/LONDON – World stocks stabilized on Tuesday and oil prices recovered from the previous day’s heavy selling, as investors grew more confident.
The STOXX index of Europe’s biggest shares rose 0.6 percent while Wall Street futures rebounded 1 percent after the S&P 500 and Nasdaq suffered their biggest daily percentage drops since May on Monday.
German and US government bonds, in heavy demand amid the stock market selloff of Monday, saw yields slip 2-3 basis points respectively.
Investors pointed to the broadly positive market backdrop with central bank money-printing and the recovery in the world economy post-pandemic as reasons to stay bullish.
“Accommodative monetary and fiscal policies and macro recovery are still suggesting a buy-the-dip strategy,” said Angelo Meda, head of equities at Banor SIM in Milan.
Some caution still lingered however, given a raft of central bank meetings including Wednesday’s Federal Reserve statement that may bring the bank a step closer to tapering.
MSCI’s index of world stocks was flat, having plunged 1.6 percent on Monday. S&P 500 futures were almost 1 percent higher but the index stands around 4 percent below record highs hit in early-September
Japan’s Nikkei returned from a market holiday with a drop of 2 percent.
Australian stocks rose 0.35 percent as miners BHP and Rio Tinto attempted to bounce back from nine-month troughs hit on Monday amid demand fears.
Copper hovered near one-month lows however, due to fears about demand for the metal widely used in construction.
Cryptocurrencies too found a floor, with bitcoin bouncing off 1-1/2-month lows..
Other market tests loom, with central banks spanning the United States, Britain, Japan, Norway, South Africa, Sweden and Switzerland meeting this week.
Nerves ahead of the Fed kept the dollar from moving much lower, though it notched small losses against the euro and the Aussie, with the euro at US$1.1730.
Ten-year US Treasury yields crept up to 1.3279 percent even if many analysts now reckon details of the Fed’s taper timeline may not be announced until November.
“Central banks rightly need to think about the ways they withdraw from these historically high levels of monetary accommodation, but the task is being made much more difficult by fiscal blockages in the US,” GSFM investment strategist Stephen Miller said.
He was referring to Congressional wrangling over passing a spending package and lifting the Treasury’s borrowing limit.
Central banks will likely be watching gas price moves, with sharp price increases possibly exacerbating inflation risks and hurting the economic recovery. European gas prices, up some 280 percent this year, slipped a touch after an 11 percent jump on Monday
Brent crude prices meanwhile rose by more than 1 percent.